Finance Bill

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New Clause 6

Gifts inter vivos
‘(1) Omit section 82(5) and (9) of FA 1985 (adjudication of certain gifts inter vivos).
(2) Accordingly, omit paragraph 9 of Schedule 14 to FA 1999.
(3) The amendments made by this section have effect in relation to instruments executed on or after 13 March 2008, other than instruments effecting a land transaction (within the meaning of paragraph 22 of Schedule 32).
(4) For the purposes of section 14(4) of the Stamp Act 1891 (instruments not to be given in evidence etc unless stamped in accordance with the law in force at the time of first execution), the law in force at the time of execution of such an instrument shall be deemed to be the law as varied in accordance with this section.’.—[Jane Kennedy.]
Brought up, read the First and Second time, and added to the Bill.

New Clause 7

Abandonment expenditure: deductions from ring fence income
‘(1) FA 1991 is amended as follows.
(2) Section 64 (relief for expenditure incurred by a participator in meeting defaulter’s abandonment expenditure) is amended as follows.
(3) In subsection (1)(a)—
(a) omit “(as set out in section 107 of this Act)”, and
(b) for “sub-paragraph (1)(a)” substitute “sub-paragraph (2)”.
(4) In subsection (1)(b)—
(a) for “sub-paragraph (4)” substitute “sub-paragraph (2)”, and
(b) for “qualifying” substitute “contributing”.
(5) In subsections (2), (3), (4) and (5) (in each place), for “qualifying” substitute “contributing”.
(6) Section 65 (reimbursement by defaulter in respect of certain abandonment expenditure) is amended as follows.
(7) In subsection (1)(a)—
(a) omit “(as set out in section 107 of this Act)”, and
(b) for “sub-paragraph (1)(a)” substitute “sub-paragraph (2)”.
(8) In subsection (1)(b), for “sub-paragraph (4)” substitute “sub-paragraph (2)”.
(9) In subsections (1) (in each place), (4), (5) (in each place), (6), (7) (in each place) and (8), for “qualifying” substitute “contributing”.
(10) The amendments made by this section have effect in relation to expenditure incurred after 30 June 2008.’.—[Jane Kennedy.]
Brought up, read the First and Second time, and added to the Bill.

New Clause 8

Qualifying expenditure: R&D relief and vaccine research relief
‘(1) Paragraph 5 of Schedule 20 to FA 2000 (R&D tax relief: staffing costs) is amended as follows.
(2) In sub-paragraph (1)(b), after “company;” insert—
“(ba) the compulsory contributions paid by the company in respect of benefits for directors or employees of the company under the social security legislation of an EEA State (other than the United Kingdom) or Switzerland;”.
(3) Before sub-paragraph (1A) insert—
“(1ZB) In sub-paragraph (1)(ba) “social security legislation” means legislation relating to any of the branches of social security listed in Article 3(1) of Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the co-ordination of social security systems (as amended from time to time).”
(4) Schedule 13 to FA 2002 (vaccine research relief) is amended as follows.
(5) In paragraph 2 (qualifying expenditure)—
(a) in sub-paragraph (1)(a), at the end insert “or”,
(b) omit sub-paragraph (1)(c) (and the “or” before it), and
(c) omit sub-paragraph (4).
(6) In paragraph 6 (qualifying expenditure on sub-contracted research and development), omit—
(a) in sub-paragraph (1), the second sentence, and
(10) The amendments made by this section have effect in relation to expenditure incurred on or after such day as the Treasury may by order appoint.
(11) Paragraph 10(4) of Schedule 13 to FA 2002 (time limit for giving notice of election for connected persons treatment) does not apply to a notice of an election under that paragraph in relation to sub-contractor payments if—
(a) the sub-contractor falls within paragraph 6(3) of that Schedule (repealed by this section) (charity, university or scientific research organisation), and
(b) the notice is given before the end of the period of 12 months beginning with the day appointed under subsection (10).’.—[Angela Eagle.]
Brought up, and read the First time.
The Exchequer Secretary to the Treasury (Angela Eagle): I beg to move, That the clause be read a Second time.
I do not intend to detain the Committee long, since this is a wholly beneficial clause. The Committee will recall that in an earlier sitting, changes to the research and development tax credit and vaccine research relief were agreed, including an enhancement of the rate of R and D credit for large companies and small and medium-sized enterprises. Those enhancements are accompanied by minor changes to the rules governing the small and medium-sized R and D credit and the vaccine research relief, which are notifiable state aids, to comply with the state aids framework.
Following further discussions with the European Commission, three further small changes to the schemes are necessary. The new clause introduces those changes, which are necessary to secure state aid approval. I can confirm to the Committee that, subject to these changes, the European Commission has now approved all the improvements to the R and D credits scheme and the vaccine research relief scheme, increasing the R and D credits generosity by some £180 million per year. If the clause is approved, we will implement the improvements from the earliest possible date after Royal Assent, which we hope will be 1 August this year. I commend the new clause to the Committee.
Mr. David Gauke (South-West Hertfordshire) (Con): It is a great pleasure, Sir Nicholas, to serve once again under your leadership. It seems such a long time since I was last standing here and even longer since we debated research and development and vaccine research relief—it was a whole Test series ago.
I have only a couple of comments on the provisions, the first part of which, as the Exchequer Secretary said, relates to EU anti-discrimination legislation and changes to make the Bill compliant with that. The issue relates to allowing the equivalence of national insurance contributions paid in the European economic area to count for research and development staffing costs and ensuring that relief is available in the same way as it is within the UK. Will the Minister confirm that this is for EU purposes and there is no intention to make the provision worldwide? It will apply only for the EEA and Switzerland, I believe.
My second point is on vaccine research relief. The provisions, as I understand them, stop vaccine research relief being subcontracted to an independent body by way of contribution to their research. In other words, a company would not be able to pay a university £100 to do research on vaccines and get a £150 deduction—to use those numbers as an illustration. Presumably the intention is to make sure that research is subsidised only if it is carried out directly by the company and under the control of the company. Presumably for the benefit of universities and companies researching vaccines, the Government want to encourage co-operation. We have a tremendous resource in our universities and it is frustrating that sometimes our companies may not use universities as much as they might. One could put it another way and say that universities may not always be in a position to assist companies as much as they could. There are strong arguments for encouraging greater co-operation between those two parts of our economy in fields such as vaccine research, but the new clause appears to hamper that development.
The Government may argue that the vaccine research relief should be available only when the research is done by the company itself. However, if the best entity to do the research is a university or a third party, why should the relief not be available? If we wish to encourage expenditure on vaccine research, and encourage companies in that field to grow through the quality of the research undertaken, why make the way vaccine research relief works a barrier? That is my point, and I would be grateful for clarification from the Minister on the thinking behind the new clause. Does she recognise that there is concern and that further explanation is needed?
Angela Eagle: First, I can confirm that the hon. Gentleman’s interpretation of the changes to the R and D relief with respect to national insurance contributions is correct—relief will be paid for costs in EEA countries and Switzerland, but not worldwide. He is right, as I mentioned in my brief opening remarks, that it is a state aid issue and, therefore, there is no requirement or intention to extend the changes worldwide.
The hon. Gentleman is wrong about the vaccine research relief, however. The changes do not prevent relief for research that has been contracted to universities or charitable companies. The change aligns the treatment of those bodies with that of other subcontractors, and it moves the relief available to them down from 100 per cent. of the costs to 65 per cent. Again, that was a technical issue about state aid approval. It is still possible for a company, charity, university or subcontracted scientific research organisation jointly to elect to be treated as connected parties and claim the full amount of costs incurred. It is an alignment, not a ban.
Mr. Gauke: I am grateful for clarification that the provision is not a ban as such; none the less, it is an alignment that makes using universities for vaccine research less attractive. That is a fair interpretation of the new clause.
Angela Eagle: It makes it slightly less attractive, but at present nobody has used it in its more attractive state. Vaccine research relief is a small and limited scheme, which deals only with TB, malaria and certain strains of HIV. It is not a general issue, and even at 100 per cent. relief we have seen no use of it. We are not worried about the practical effect of the alignment.
Question put and agreed to.
Clause read a Second time, and added to the Bill.

New Clause 10

VAT on beverages
‘The Treasury shall, not later than six months after the passing of this Act, prepare and lay before the House of Commons a report setting out the estimated costs to the Exchequer, and the estimated health benefits to the population of the United Kingdom, of reducing the amount of VAT payable on beverages containing fruit juice to the lowest level permitted.’.—[Justine Greening.]
Brought up, and read the First time.
Justine Greening (Putney) (Con): I beg to move, That the clause be read a Second time.
It may be helpful if I spend a brief time talking about the background as to why the issue has arisen. I shall then talk about the picture at present, beverages and food generally and then about why I think the mew clause is important in that context.
First, let us talk about the state of the nation’s health, which is ultimately the background to our tabling the amendment. The provision would obtain a fact base for the Government to understand to what extent VAT could be used to encourage healthy eating. Across the nation, healthy eating has risen up the political agenda dramatically, certainly over recent years, for a number of reasons. The main reason is many people’s sense that the state of our nation’s health is getting steadily worse, particularly in terms of avoidable ill health. The situation is worse than it has been for some time, perhaps worse than it has ever been. One only has to look at some key statistics for obesity on the Department of Health website to start to understand the magnitude of the problem and its implications.
The latest statistics, which I think are from 2006, show that 24 per cent. of the adult population in England is already classified as obese. Although that is weighted equally between male and female populations, women are more likely to be morbidly obese than men. My understanding is that if current obesity levels continue to rise as they have done, about 60 per cent. of men and 50 per cent. of women will be clinically obese by 2050.
We know the impact of obesity on people and on public finances. For the individual, obesity unfortunately comes with a whole bundle of negative health impacts. Conditions such as type 2 diabetes, heart disease and even, it would seem, some types of cancer—endometrial, breast and colon—can to some extent be attributed to excess body fat. According to the Department of Health, 9,000 premature deaths each year in England are semi-related to obesity. There are broader effects such as the impact of ill health on people’s ability to work productively and the fact that they also have higher sickness rates.
More worrying is the picture of obesity in children. Almost one fifth of all children under the age of 16 are classed as obese, and the figure is expected to rise to 25 per cent. by 2050 if these sorts of trends continue. It is deeply worrying.
The problem is not just the lack of healthy eating. There is also a problem regarding lack of exercise. The extent to which people are taking regular exercise is declining, or at best static. Many of us who live in London are hoping that the 2012 Olympics will be used as a positive spur to encourage people to take exercise. Looking at the NHS statistics, just 40 per cent. of men and 28 per cent. of women met the minimum recommendations for physical activity in adults—at least 30 minutes of activity on at least five days a week.
5 pm
Patrick Hall (Bedford) (Lab): I know that the hon. Lady is being serious and I take the subject that she is talking about seriously, but could she assist us all by coming to an early conclusion on the matter so that we can all go to the gym?
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