Clause
52Exemption
for certain non-domiciled
persons Mr.
Jeremy Browne (Taunton) (LD): I beg to move amendment 177,
in
clause 52, page 24, line 13, leave
out ‘£100’ and insert
‘£500’. You
will recall, Mr. Hood, that we had an extremely lengthy
debate on all these matters a year ago, and that I had the opportunity
to raise every issue I could conceivably think of—and many that
I had not previously thought about—with regard to the topic. I
do not intend to go over all that ground again, especially as it has
been touched on in our discussions on schedule 27, but I have tabled
this specific amendment. Yet again, I cannot claim its original
authorship, because representations were made to me by the Chartered
Institute of Taxation’s Low Incomes Tax Reform Group on that
specific point, so it seemed reasonable to raise the issue and have a
short discussion on
it. You
will recall, Mr. Hood, that a year ago, we touched on the
fact that non-doms are always portrayed in the media as extremely
wealthy, but of course there are some who are not wealthy. Just before
we broke for lunch, the point was made that fruit pickers from Poland,
for example, or people doing jobs that pay only the minimum wage or a
small amount above it would nevertheless be classified as non-doms. The
amendment concerns the tax they would be eligible to pay on interest on
money in their bank accounts. Because of sterling’s decline
against the euro, people who live elsewhere in Europe, or who are paid
in euros, might be able to accumulate even more money than normal.
Anyone working hard and applying themselves, even if earning a
relatively small amount of money, could build up a reasonable balance
without it being regarded as large by any normal person’s
standards, and they would be eligible to pay interest on that balance.
The point was well made by the hon. Member for Fareham that that might
be seen as unreasonable, although that is a subjective view.
The other
point that the hon. Gentleman made was about practicalities: for
someone eligible to pay £20 of tax on a balance of £100,
in terms of additional interest, it seems to be quite an administrative
burden to recoup a rather small amount of money. The amendment
therefore proposes that the clause should specify £500 for
interest payments, rather than £100, which would give people
just a little more of a cushion, with regard both to practicality and
to giving people an opportunity to save a small but reasonable amount
of money. That would be more workable and
reasonable.
Mr.
Mark Field (Cities of London and Westminster) (Con): I
wish to speak briefly to oppose the amendment. To raise £100 a
year in a standard, current or gold service account seems trivial but,
in the low interest-rate economy in which we now live, it would need an
ongoing balance of around £20,000. It is in part a function of
the low interest-rate economy—which will be with us for at least
the tenure of this Finance Act—that that seems a sensible de
minimis level. I understand the rightful concern that we do not want
anything too pettifogging, with too many different rules. In this
context, the difference between a minimum of £100 and one of
£500 might seem trivial, but it would require a six-figure sum
in a current account to raise £500 a year, as interest rates
tend to be below 0.5 per cent., even for the most generous basic savers
accounts.
The hon.
Member for Taunton is absolutely right that we should encourage those
non-domiciles who are not well off. In my own central London
constituency, there are significant numbers of people—perhaps
spouses, ex-spouses or relatives of wealthy investment
bankers—who are non-domiciled but are not as well off as the
general image suggests. It is fair that they should have a reasonable
day-to-day balance of a few months’ living expenses under their
belts—perhaps as much £10,000 or £15,000 a
year—well within the constraints that the Government and
Treasury have in mind. If there were significant increases in interest
rates in the foregoing 12 months I hope that the Treasury would return
to this and raise that minimum threshold. At this juncture, £100
is a relatively sensible one to have in
place.
Mr.
Timms: I am with the hon. Member for Cities of London and
Westminster on this one in the debate we have just heard. The hon.
Member for Taunton is absolutely right that a lot of foreign workers on
low incomes come to the UK and might well fall within the remittance
regime—people working in agriculture or construction—and
it was never our intention to bring low-paid workers into
self-assessment in that way, still less so when there is no tax
involved. The clause introduces an income tax exemption on overseas
income, which effectively removes the obligation to file a
self-assessment return from anyone who has foreign employment income of
less than £10,000 in any tax year, as we were discussing a
moment
ago. People
might also have small amounts of income from bank accounts or other
investments overseas in addition to their foreign employment income.
That would again trigger an obligation to file a self-assessment return
and, again, that was not the intention. The change here is that people
with overseas bank interest of less than £100 in any tax year
will still be able to take advantage of the tax exemption. I should
clarify the fact that the clause requires that the foreign income must
be subject to a foreign tax. That does not mean that the person must
actually have paid tax on the income in a country other than the UK. It
could well be that the income in question is liable to a tax rate of 0
per cent. or could be covered by overseas personal allowances, in which
case no tax would be payable on it but it would still count as subject
to a foreign tax in this clause.
I think that
the hon. Member for Cities of London and Westminster is right: an
investment income of £100 in the current environment does equate
to a significant capital saving. That is set at the right level in the
current
environment to ensure that the people who are the target of this measure
will not be brought into self-assessment. An investment income of
£500 would mean a significant capital sum. The clause deals with
individuals on low incomes who come to work in the UK in the sort of
situations that we have discussed. I am not aware of any evidence of a
need to increase the threshold, and I am confident that nobody will be
prevented from taking advantage of the tax exemption and the
administrative relaxations that it delivers. I accept that we
should keep the matter under review, as circumstances
might change and the threshold might need to be raised, but
the £100 level is right for
now. Mr.
Browne: I am happy to have had the opportunity to make my
point and to have heard the entirely valid arguments made by the two
other contributors during our brief discussion. On that basis, I beg to
ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
Question
proposed, That the clause stand part of the
Bill.
Mr.
Hoban: The principle of the clause—the introduction
of a £10,000 exemption—was discussed at length last year.
There were various proposals at that time, one of which was tabled by
the hon. Member for Taunton to change the exemption from £2,000
to the value of the personal allowance. The then Financial Secretary
said that that would be far too expensive and that we should not do it,
but the Government have clearly had a change of heart. Concerns were
also raised a year ago about the administrative burden that such a low
level would place on Her Majesty’s Revenues and Customs, but
again we were assured that that was not a problem. However, here we are
a year later, and there has been a sea change in the Treasury’s
approach, with the introduction of a £10,000 exemption for
earned income. To make sure that the Minister will not claim that I
grudgingly welcome the measure, I will say that I wholeheartedly
welcome it. It is a very sensible measure and one that the Government,
had they listened to the representations of people such as the Low
Incomes Tax Reform Group last year, would have included in the previous
Finance
Bill. The
Minister made a comment earlier about interest income being subject to
tax. Will that also apply to employment income? The LITRG raised the
issue in its representation this year, which takes us back to
828B(2)(b) which states
that “all
of that amount is subject to a foreign
tax.” The
Minister’s earlier reassurance in response to the amendment
tabled by the hon. Member for Taunton that personal allowances and
zero-rate bands will be taken into account is helpful, and applies to
employment income as well as interest income. I would be grateful if
the Minister could place that on
record. Is
the issue raised by the LITRG something that the Government will
determine on a territory-by-territory basis where income for a
territory is subject to tax, or will there be a blanket exemption? If
it is to be determined on a territorial basis, it would be helpful to
have a list of jurisdictions where the Government believe that up to
£10,000 of income has been subject to tax. That list of
countries will need to be made known to migrant workers who are here on
a temporary basis, as they need to be told what is and is not
appropriate. A blanket exemption,
however, would be administratively easier for migrant workers, as it
would avoid having to communicate to them a list of exempt
companies. I
would therefore like the Minister to clarify two points. First, will he
clarify what is involved in being subject to foreign tax, and will he
confirm that his explanation on the £100 investment income also
applies to employment income? Secondly, is it a blanket exemption, or
will it be applied on a territory-by-territory basis? Perhaps he could
just round that off by saying why he now thinks that £10,000 is
appropriate, whereas last year it was seen as being a necessary cost to
the
taxpayer.
Mr.
Browne: I wish to speak briefly to the clause. I am
reliably informed—I admit that I did not conduct this research
in the Derby Gate Library myself—that in the drafting last year,
schedule 7 ran to 55 pages, or 22,989 words, and there were 160 pages
of explanatory notes and more than 100 Government amendments wrestling
with this difficult area to try to get a grip on it and make it
workable in practice. Even then, the Institute of Chartered Accountants
in England and Wales described the Government’s efforts
as
“incomprehensible,
unworkable and likely to be undermined by poor
compliance.” 1.30
pm On
that basis, I am extremely grateful that the Government have listened
to representations made by members of this Committee and others who do
their best to ensure that the Government’s policies work in
practice. I am extremely flattered that the general direction that the
Liberal Democrats have been taking in respect of tax thresholds is
being adopted incrementally by the Government, and that the
intellectual argument is being won. It is important that, wherever
possible, people on low incomes are given the most incentive to work
and contribute to our economy. I am sympathetic to what the Government
have finally managed to achieve and interested to know whether the
Minister will take this consultative, wide-ranging approach in future
and take on board any of the other suggestions made by Opposition
parties.
Mr.
Timms: My right hon. Friend the Member for Liverpool,
Wavertree, who was then the Financial Secretary, agreed that there
should be a discussion with the Low Incomes Tax Reform Group and
others, and that discussion has proved to be fruitful. Of course, we
always listen to suggestions made by hon. Members in this Committee and
elsewhere. I shall take the remarks that have been made as a warm
welcome for the changes in the
clause. This
is a useful reminder that the remittance basis of taxation does not
affect only wealthy people, as we have discussed. The LITRG and TaxAid
pointed out that, as a result of the changes made last year to the
remittance basis rules, many people on low incomes could be required to
file a self-assessment return. The clause removes that obligation from
any individual whose foreign income solely comprises overseas
employment income of less than £10,000 and overseas bank
interest of less than £100 in any tax year, all of which is
subject to tax in the country where the income was
earned. To
respond to the specific points raised by the hon. Member for Fareham,
yes, the observations that I made in the context of investment income
apply equally to
employment income. The exemption is a blanket exemption rather than a
territory-by-territory
exemption. I
gladly express gratitude to all those who have made representations on
the subject, and I hope that the Committee will be content to add the
clause to the
Bill. Question
put and agreed to.
Clause
52 accordingly ordered to stand part of the
Bill.
Clause
53 ordered to stand part of the
Bill.
Schedule
28Taxable
benefits:
cars Question
proposed, That the schedule be the Twenty-eighth schedule to the
Bill.
Mr.
David Gauke (South-West Hertfordshire) (Con): It is a
great pleasure to serve under your chairmanship, Mr. Hood, I
believe for the first time in this Bill Committee. I assume that the
Exchequer Secretary will be dealing with this schedule. May I formally
welcome her back to the Treasury? I know that this is not the first
time she has been a Treasury Minister. Perhaps she is following the
example of the Financial Secretary as a serial Treasury Minister. I do
not know whether she will reach his total number of spells in the
Treasury—I suspect she will not do so in the immediate
future. Schedule
28 deals with provisions regarding taxable benefits that arise from
cars being made available to employees by reason of their employment. I
have a couple of queries that I would like to raise with the Exchequer
Secretary. The first matter is the abolition of the current
£80,000 list price cap, which will lead to higher tax charges
for individuals using more expensive cars. The Institute of Chartered
Accountants in England and Wales asked whether that proposal will have
an impact on the UK car industry, because the UK car industry produces
a number of cars that would exceed the £80,000 list price cap. I
would be grateful if the Exchequer Secretary said whether any
assessment has been made of that
impact. The
second issue is directly relevant to provisions regarding the taxable
benefits that arise from cars being made available to employees by
reason of their employment. I will mention briefly a slightly
specialist point, and, to be fair to the Exchequer Secretary, it is a
matter that she may find easier to respond to in writing. In April,
through correspondence, I raised with her predecessor the issue of car
dealership employees who are taxed on their use of demonstrator cars.
The problem relates to those employees working for car dealerships who
use demonstrator cars for their own private use. It has long been
accepted that it would be inappropriate to tax that benefit in kind in
exactly the same way as company cars are usually taxed. It is likely
that the employee will use more than one car or that they have no
choice over which car to drive. The car that the employee drives is
likely to be disproportionately expensive compared with their
salary.
As a
consequence, a system has developed whereby HMRC has looked at a range
of models and averaged a value to calculate a figure for the relevant
benefit in kind. A new system was introduced in April that still
works on the basis of averaging the value, but it is done on narrower
bands. I have received representations from car dealerships and
manufacturers because the consequence of that is likely to be that more
car dealership employees pay tax. In addition, the measure is likely to
increase the administrative burden on car dealerships. As I said, I
have raised that point previously in correspondence, but given that
schedule 28 deals specifically with taxable benefits and cars, I have
taken the opportunity to raise it
again. | 
