House of Commons
|Session 2008 - 09|
Publications on the internet
Public Bill Committee Debates
Draft Enactment of Extra-Statutory Concessions Order 2009
The Committee consisted of the following Members:
Mick Hillyard, Committee Clerk
attended the Committee
The following also attended, pursuant to Standing Order No. 118(2):
First Delegated Legislation Committee
Monday 16 March 2009
[Joan Walley in the Chair]
Draft Enactment of Extra-Statutory Concessions Order 2009
That the Committee has considered the draft Enactment of Extra-Statutory Concessions Order 2009.
The Chairman: With this it will be convenient to consider the Insurance Premium Tax (Amendment of Schedule 6A to the Finance Act 1994) Order 2009.
Mr. Timms: I bid you a warm welcome to the Chair, Ms Walley, as this is the first time that I have had the pleasure of serving under your chairmanship.
The debate deals with extra-statutory concessions. Administrative concessions give taxpayers a reduction in tax liability to which they would not be entitled under the strict letter of the law and have been a feature of the tax system for a long time. The majority of concessions deal with what are, on the whole, minor or transitory anomalies in tax legislation. They are often designed to meet cases of particular difficulty at the margins of the tax code. Most concessions are contained in the booklets IR1, a former Inland Revenue publication, and notice 48, a former publication of Her Majestys Customs and Excise.
The decision of the courts in the Wilkinson case made it clear that the scope of HMRCs administrative discretion to make concessions that depart from the strict letter of the law is narrower than had previously been thought. The decision also drew attention to the likelihood that some existing concessions might have exceeded that scope.
The result is that HMRC is reviewing all its concessions. Each concessionthere are about 500 in totalwill be considered carefully, and the aim is to retain as many as possible, but some might no longer be required, and it might not be possible to legislate for the effect of others. Most concessions will continue to operate as they do now, but there are likely to be several for which the tax treatment can continue only if they are put on a statutory footing.
Section 160 of the Finance Act 2008 was designed to enable us to give statutory effect to tax concessions. It applies only to concessions that were in existence at the time of the passing of the 2008 Act. It cannot be used to introduce new concessions or to extend the effect of existing ones.
As part of the review, HMRC has now identified several concessions beyond the scope of its powers that can now be legislated for using the power set out in the 2008 Act. The first order consists of legislation on
The draft legislation for those concessions and a further two that are subject to the negative procedure were the subject of a full 12-week public consultation, in which views were sought on whether the draft legislation accurately translated the effect of the 19 concessions. The major tax bodies were consulted, as were the representative bodies from the individual sectors affected.
The responses to the consultation have been positive, and the major tax bodies and representative bodies are pleased that the Government are legislating for these concessions. The Chartered Institute of Taxation stated that
the move to identify concessions and, where appropriate, to place them on the statute book is something we welcome.
Other groups have also been positive.
I should like to thank all those who responded to the consultation and helped us in that way. The consultation has helped us confirm that the legislation presented in the orders accurately replicates the effect of the original concessions. I am happy with the scrutiny given to the draft legislation and welcome the positive responses that the process has received. I commend the orders to the Committee.
Mr. Mark Hoban (Fareham) (Con): It is a pleasure to serve for the first time under your chairmanship, Ms Walley, although I suspect that it will be very brief on this occasion.
We welcome the two orders. We had a full debate on the enabling power during the passage of the Finance Act 2008. Therefore, I do not have many questions. The Minister referred to the consultation process, which I gather raised questions such as whether the phrases living together and living with mean the same thing. Clearly, there has been some detailed consideration by tax advisers.
The consultation document referred to three lists of extra-statutory concessions. Most items in the first list are picked up in these statutory instruments or in the two that were subject to the negative procedure, to which the Minister referred. However, appendix B said that clarification is needed before legislation is drafted in five casestwo relating to the issuance of premium tax; one to income tax, which is overlaps with corporation tax; and two to corporation tax exclusively. Will the Minister advise the Committee of any progress in establishing whether clarification is needed and whether legislation must be drafted?
Mr. Jeremy Browne (Taunton) (LD): Thank you for giving me an opportunity to contribute, Ms Walley. I, too, will be brief, because I do not anticipate a wide divergence of views on these subjects.
I am interested to hear more detail about the Ministers views on the process. He said that 500 exemptions had been considered. What is the monetary value of those concessions? To put that differently, what is the cost to the taxpayer of extending those 500 acts of generosity to various groups in society? Was consideration given to removing some concessions to raise revenue to address
When the insurance premium tax was introduced in the 1990s, I remember thinking that the motivation behind it was slightly strange. I understand that it closed a loophole, but the basic tax penalised some people additionally if their car was stolen or their house broken into, because they paid a premium on insuring themselves against those eventualities. When the Treasury considered the exemption from that tax, did it look at wider exemptions that might have been regarded as beneficial to other groups in society, even if there were consequent cost implications?
Paul Farrelly (Newcastle-under-Lyme) (Lab): It is a privilege to serve for the first time under the chairmanship of my constituency next-door neighbour, Ms Walley.
Will the Minister itemise the cost to the Exchequer of each concession? These days, we are all concerned about tax abuse, tax avoidance and loopholes. A few weeks ago, I tabled some questions to the Treasury about capital gains tax, which the Minister answered. One question was on how much the personal allowance for capital gains, which is additional to the annual allowance for income tax and higher than it, cost the public purse. The Minister or the officials who drafted the answer said that they did not know, which seemed quite astounding for such a big item. It is much bigger than some that we are considering today. I will follow that up with the Minister, but I would be grateful if he commented on the costs.
Mr. Timms: I am glad that the two orders are generally welcome. The hon. Member for Fareham referred to the detail of the consultation, and he was absolutely right. For example, on the extra-statutory concession about foreign-owned works of art, some respondents asked that
solely for any one or more of the purposes of public display, cleaning and restoration
be replaced by
for one or more of the purposes of public display, cleaning and restoration (and for no other purpose),
and we happily acceded to that demand.
I turn to the other outstanding issues that the hon. Gentleman mentioned. The two-month discussion with the industry on the outstanding concessions will not be concluded until 1 May. I can assure him that we do not see this as an opportunity to raise extra revenue for the Exchequer. If we were minded to look for additional revenue in any of these areas, we would need to do that in the normal way, by announcing a Budget measure and legislating in the Finance Bill.
This exercise is purely about ensuring that concessions that have been usedin many cases for a long timecontinue to be available. If there were to be a change, we would introduce it in the Finance Bill. As the hon. Member for Taunton suggested, we might find that some of the concessions were no longer relevant and would therefore not legislate for them. In some cases, it might not be possible to legislatefor example, if such a concession was contrary to European law. If we can, however, we will legislate to maintain all the concessions that have been used.
We think that the revenue that the concessions account for is less than £5 million a year. I will give some information to my hon. Friend the Member for Newcastle-under-Lyme. I have data on each concession, but the total is pretty modest. The intention of the exercise is simply to be able to continue arrangements that have always applied. If we wanted to change any of those arrangements, the proper way to do so would be through the Budget.
There will be more consultation exercises, as further tranches of concessions need to be consulted on. We will therefore go through the exercise systematically in the period ahead.
Question put and agreed to.
INSURANCE PREMIUM TAX (AMENDMENT OF SCHEDULE 6A TO THE FINANCE ACT 1994) ORDER 2009
That the Committee has considered the Insurance Premium Tax (Amendment of Schedule 6A to The Finance Act 1994) Order 2009 (S.I., 2009, No. 219)(Mr. Timms.)
|©Parliamentary copyright 2009||Prepared 17 March 2009|