Finance Bill

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Kitty Ussher: I welcome the fact that the hon. Gentleman has tabled a probing new clause in such an important area. He is right that we issued a consultation response in March this year containing several proposals to make things easier and raise awareness of the gift aid scheme, which has been welcomed thoroughly by the charitable sector. We also say in the document that there are complex issues around the way in which the gift aid system works. A number of points have been made about how the mechanics of the system could be altered to make it easier for some donors to give, and we continue to research the issue.
I have worries about the new clause because a specific solution would raise some concerns among the charitable sector. By ending the tax relief system, it could make charity income streams more dependent on Government spending, which may raise concerns. More work needs to be done on the whole matter of donor behaviour. We would not want to signal that we were necessarily considering one particular solution without understanding fully the effect of that signal on the market, so we resist the new clause because it would be doing precisely that. It would signal specifically a particular avenue that we wanted to travel down, while we are still at the stage of undertaking broader research.
Mr. Hammond: I am grateful to the Minister for at least confirming that the Government are doing more work in such areas. She expressed concern that such a measure might increase the charitable sector’s dependence on Government income. I stressed in my remarks that that is not our purpose. We see it the other way: we have to reinforce the donor base to allow charities to feel confident that they can tender for Government contracts and deliver public services to Government bodies, without compromising their independence and their essential ethos. I know, as she will from talking to charities, that one of their worries is that if they take the Government shilling—although it is welcome at the time and allows them to participate in new areas—they run the risk of sacrificing some independence. It is precisely to avoid that situation that we want to explore possibilities in the area. However, I am happy that the hon. Lady has said that she is open to the idea, among others, and will undertake further research into the matter. I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.

New Clause 22

Mileage allowance payments
‘(1) ITEPA 2003 is amended as follows.
(2) In section 229, at end insert—
“(5) Mileage allowances are to be treated as approved if they are paid—
(a) otherwise than in connection with an office or employment;
(b) to someone who is not employed by the payer or an associate of the payer; and
(c) for less than 10,000 miles in any one year.”.
(3) In section 230, at end insert—
“(7) The Treasury shall publish annually a report setting out its assessment of the impact of the rates in subsection (2) on the level of participation of volunteers in community transport schemes.”’.—[Mr. Breed.]
Brought up, and read the First time.
The Chairman: I am happy to call Colin Breed, who has been very patient.
Mr. Colin Breed (South-East Cornwall) (LD): I beg to move, That the clause be read a Second time.
The purpose of the new clause is to prompt an annual review of the mileage allowance, the rates for which are contained in the Income Tax (Earnings and Pensions) Act 2003. I suppose that most members of the Committee know that the current rates for a car or van are 40p per mile for the first 10,000 miles and 25p per mile thereafter. Under section 230(6) of the Act, the Treasury can alter the rates by regulation, but the 40p rate has been static since 2002-03.
The background to the debate is a matter that I raised with the Chancellor personally at a sitting of a recent Treasury Committee and, to some alarm, I found him reasonably sympathetic. He had actually received a letter on the same issue from a constituent who had referred to the effect of increasing fuel prices on the mileage rates for volunteer drivers. Those who operate within organised volunteer car schemes can claim mileage allowances that only incur tax if they make a profit through claiming expenses in the tax year. The HMRC guidance states that the tax-free mileage allowances are intended to give tax relief for amounts that represent fair reimbursement for car use. However, it has become patently obvious that in many parts of the country volunteers are finding it almost impossible to volunteer their services and provide car transport, owing to fuel costs.
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To give some idea of the scale, in Cornwall, about 5,000 trips per week are undertaken by volunteer car drivers using their own cars and claiming mileage, and about 75 per cent. of rural parishes have no daily bus service and no community transport scheme. Many people rely upon non-emergency patient transport services provided by groups, such as Help the Aged, the Red Cross, St. John Ambulance and Age Concern, all of which enable people to access important services, such as hospitals and doctors, and to get into town. The problem before us has come about very recently owing to increased fuel costs, and many volunteers are now leaving services, which are finding it almost impossible to provide the transport for those who require it.
If a volunteer receives payment above the 40p and 25p thresholds, their status changes from volunteer to car hire operator, which makes them liable for income tax. Furthermore, the AA has indicated that it believes that it could invalidate motor insurance for voluntary workers under the Public Passenger Vehicles Act 1981, so even if the rates were raised in order to keep people volunteering, their insurance could be invalidated and their status changed.
I do not want to go through all the fuel figures and everything else—we are all aware of them—but the main thrust of my argument is quite clear. The Community Transport Association has called on the Government to consider fair reimbursement to volunteers in the light of what it considers to be outdated regulations. In a recent survey, it found that 55 per cent. of organisations attributed the loss of volunteer drivers to high fuel costs. That is happening now and everyday, and in many parts of the country volunteer drivers are relied upon more and more. If we cannot stop them leaving the service and providing essential transport to places such as hospitals, doctors and clinics, we will have a major problem.
Justine Greening: I was very interested in the hon. Gentleman’s comments, and we support him, but volunteer drivers are important in not only rural areas, but urban areas. In modern day Britain, families are increasingly fragmented, for all sorts of reasons, and therefore as people grow older they become dependent on networks of volunteers to enable them to retain their independence. So we have a great deal of sympathy with his aims, and if he pressed it to a Division, we would support it. There is no doubt that, in line with what he has just said, there are some rapidly rising costs of motoring across the board. We need to take care to ensure that we understand how that affects these key groups of people, who are perhaps most susceptible to changing their decisions about whether or not to drive as a result of increased motoring costs. There could be a much more disproportionately negative impact on our communities as a whole than on people’s individual circumstances.
I do not believe that he mentioned the figures, but the AA’s estimation of the average cost of motoring per mile is now around 58p. I am sure he is aware that only several months ago, people could buy a litre of petrol for mid-80p per litre. The last time I filled my car up on Sunday, I ended up paying £1.17. There is clearly an issue in relation to understanding the Treasury’s assessment of how the rates of mileage allowance impact on people’s behaviour in the context of rising fuel prices. I fully support what he is trying to achieve and will wait with interest to hear what the Minister has to say.
Angela Eagle: The new clause would add an additional but unnecessary statutory definition to the scope of the approved mileage allowance payments in section 229 of the Income Tax (Earnings and Pensions) Act 2003. My understanding of the intention behind the clause is that it is to ensure that people involved in voluntary work that directly involves the use of their own vehicle are eligible for reimbursement of their motoring expenses without fear of being subject to taxation.
The new clause would impose an obligation on the Treasury to publish an annual report assessing the impact of the mileage rates on the numbers of volunteers participating in community transport schemes. Let me make it clear that the Government have never wished to intervene in the reimbursement of such people. Of course, we greatly value the work of volunteers, but the new clause appears to suggest that the Government are somehow deficient in their policy on reimbursement payments to volunteers. Let me clarify the matter: it is right and proper that those who freely give their time and vehicle over to voluntary work should be able to reclaim their motoring expenses for the miles used. For that reason, volunteers are not taxable on amounts they receive if those amounts just cover their reasonable expenses. They can be reimbursed for their actual costs of driving with no tax consequences whatsoever—and that is beyond the level specified by the additional mileage allowance payments.
If it can be shown that someone’s expenses go beyond that, there should be no impact on the level of participation of volunteers in community transport schemes and no reason to publish a report. The existing approved mileage allowance payments rates can be used by voluntary organisations if they estimate their costs to be below the AMAPs rate. Without the need to put this clause on the statute book, that is already accepted by HMRC. The new clause would not serve any useful purpose. For a start, it would be included in the Income Tax (Earnings and Pensions) Act 2003, which relates solely to employment, pension and social security income. Including a clause that relates to the self-employed and volunteers in the Bill would be extremely odd.
The new clause is flawed because, as it stands, it would deny both self-employed people and volunteer drivers the option they currently have to claim the actual expenses that they incur as an alternative to using the mileage rates as an approximation. The new clause does not define the amount of mileage allowances that are approved and would affect only the first 10,000 business miles. The new clause is silent on what would happen if miles above 10,000 were used for the purpose of volunteering.
The hon. Gentleman is right to reflect the concern about high fuel prices and reimbursement, but he perhaps did not consider in his contribution that volunteers—I will repeat this point again—are entitled to claim their actual motoring costs, if they so wish. To do so, volunteers merely have to collect the information about the mileage they have spent and the costs they have incurred. If they do that, HMRC will not tax them on reimbursements—as long as they do not make a profit on the money that they claim back. Once there is a reward of that sort and it is above the mileage allowance in AMAPs, they would have to pay income tax on that amount. However, people do have an option; they can use the AMAPs scheme or they can be reimbursed with no tax consequences for their actual expenditure. With that explanation, I hope that the hon. Gentleman will see fit to withdraw the motion.
Mr. Breed: It seems quite remarkable that we even bother with a 40p rate if everybody can just claim for whatever they need to be reimbursed.
Mr. Hammond: Perhaps the hon. Gentleman might probe the Minister about the detailed record keeping and paperwork that is involved in a self-assessment income tax return to claim at a rate higher than that permitted by HMRC.
Mr. Breed: I am grateful to the hon. Gentleman. That was my second point. I was going to say first that a significant number of organisations, many of them Government agencies, do not allow their volunteers to claim more than 40p a mile, whether or not they want to keep and submit all of the things required in the paperwork. We are talking about some quite elderly people who are doing this for retirement jobs. It would be difficult for them to demonstrate to HMRC that they are being properly reimbursed, even if they could. The vast majority have no chance to put in a claim that exceeds the permitted 40p. That is why they are leaving.
If the Government are perfectly content with their current guidance and think that everything is okay, they will have one hell of a fight on their hands once again. If they ignore this and volunteers disappear out of the door, leaving people in their homes because they cannot get to hospitals and clinics, it will be the fault not of the volunteers, the health centres or the hospitals, but of the Government because they can see precisely where the responsibility lies. If the Government are happy not to change this by the time we get to Report stage, they will have only themselves to blame.
I am happy to use this as a probing motion and to withdraw it, but I hope that the Government recognise my point. I felt that the Chancellor responded more positively in the Treasury Committee than the Exchequer Secretary has today. I think that the Government should look at this issue again very quickly. I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.

New Clause 23

‘The Treasury shall, before the publication of the 2008 Pre-Budget Report, prepare and lay before the House of Commons a report on the impact of the double taxation of bingo on—
(a) the competitiveness of licensed bingo clubs, and
(b) the level of social access of individuals aged over 65.’.—[Mr. Breed.]
Brought up, and read the First time.
Mr. Breed: I beg to move, That the clause be read a Second time.
The new clause is fairly simple. It should be possible to sort out the provision within days. Quite remarkably, the Exchequer Secretary responded almost precisely to what I sought with the new clause in a written answer to a question from the hon. Member for Gravesham (Mr. Holloway) yesterday.
The purpose of the new clause was to sort out once and for all the assessment of taxation on bingo. On one hand, we are told by the Bingo Association and others that unlike casinos and betting shops, bingo is the victim of double taxation, with VAT payable at 17.5 per cent. and a gross profits tax at 15 per cent. We are told that that is significantly affecting businesses; clubs are closing, profits are going down and even the tax take for the Government is going down.
On the other hand, the Exchequer Secretary wrote yesterday:
“The Government’s assessment that tax is not at the root of the bingo industry’s problems is based on evidence from a number of sources, including data on the number of bingo clubs and on bingo stakes, commercial sector reports on the bingo industry, and representations from the bingo industry. The assessment noted the need for the bingo industry to adapt to the smoke free legislation and the impact of the implementation of the Gambling Act 2005. It concluded that the industry’s problems are a product of a combination of factors including greater competition in the leisure sector and changing tastes in leisure activities.”—[Official Report, 18 June 2008; Vol. 477, c. 990W.]
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