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That is not the definition of a building. We would all be pleased to know what a building is. Maybe if you put a roof over a wind farm, it becomes a building. I worry more substantially about the point, made so well by the noble Lord, Lord Dixon-Smith, about this merry-go-round of government money. That particularly applies to the railways, whether they are big or little ones; it is now buildings only.

I do not know how we take this forward. We will have to read the Minister’s response in great detail and have a good think about what to do next, if anything. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Andrews moved Amendment No. 135A:

135A: Clause 202, leave out Clause 202 and insert the following new Clause—


(1) Where liability to CIL would arise in respect of proposed development (in accordance with provision made by a charging authority under and by virtue of section 200 and CIL regulations) a person may assume liability to pay the levy.

(2) An assumption of liability—

(a) may be made before development commences, and

(b) must be made in accordance with any provision of CIL regulations about the procedure for assuming liability.

(3) A person who assumes liability for CIL before the commencement of development becomes liable when development is commenced in reliance on planning permission.

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(4) CIL regulations must make provision for an owner or developer of land to be liable for CIL where development is commenced in reliance on planning permission if—

(a) nobody has assumed liability in accordance with the regulations, or

(b) other specified circumstances arise (such as the insolvency or withdrawal of a person who has assumed liability).

(5) CIL regulations may make provision about—

(a) joint liability (with or without several liability);

(b) liability of partnerships;

(c) assumption of partial liability (and subsection (4)(a) applies where liability has not been wholly assumed);

(d) apportionment of liability (which may—

(i) include provision for referral to a specified person or body for determination, and

(ii) include provision for appeals);

(e) withdrawal of assumption of liability;

(f) cancellation of assumption of liability by a charging authority (in which case subsection (4)(a) applies);

(g) transfer of liability (whether before or after development commences and whether or not liability has been assumed).

(6) The amount of any liability for CIL is to be calculated by reference to the time when planning permission first permits the development as a result of which the levy becomes payable.

(7) CIL regulations may make provision for liability for CIL to arise where development which requires planning permission is commenced without it (and subsection (6) is subject to this subsection).

(8) CIL regulations may provide for liability to CIL to arise in respect of a development where—

(a) the development was exempt from CIL, or subject to a reduced rate of CIL charge, and

(b) the description or purpose of the development changes.”

The Deputy Speaker (Viscount Ullswater): My Lords, I must advise your Lordships that if this amendment is agreed to, I will not be able to call Amendment No. 136 because of pre-emption.

On Question, amendment agreed to.

[Amendment No. 136 not moved.]

Baroness Andrews moved Amendment No. 136A:

136A: After Clause 202, insert the following new Clause—

“Liability: interpretation of key terms

(1) In section (Liability) “development” means—

(a) anything done by way of or for the purpose of the creation of a new building, or

(b) anything done to or in respect of an existing building.

(2) CIL regulations may provide for—

(a) works or changes in use of a specified kind not to be treated as development;

(b) the creation of, or anything done to or in respect of, a structure of a specified kind to be treated as development.

(3) CIL regulations must include provision for determining when development is treated as commencing.

(4) Regulations under subsection (3) may, in particular, provide for development to be treated as commencing when some specified activity or event is undertaken or occurs, where the activity or event—

(a) is not development within the meaning of subsection (1), but

(b) has a specified kind of connection with a development within the meaning of that subsection.

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(5) CIL regulations must define planning permission (which may include planning permission within the meaning of TCPA 1990 and any other kind of permission or consent (however called, and whether general or specific)).

(6) CIL regulations must include provision for determining the time at which planning permission is treated as first permitting development; and the regulations may, in particular, make provision—

(a) about outline planning permission;

(b) for permission to be treated as having been given at a particular time in the case of general consents.

(7) For the purposes of section (Liability)—

(a) “owner” of land means a person who owns an interest in the land, and

(b) “developer” means a person who is wholly or partly responsible for carrying out a development.

(8) CIL regulations may make provision for a person to be or not to be treated as an owner or developer of land in specified circumstances.”

[Amendments Nos. 136AZA to 136AZC, as amendments to Amendment No.136A, not moved.]

On Question, Amendment No.136A agreed to.

Baroness Andrews moved Amendment No. 136AA:

136AA: After Clause 202, insert the following new Clause—


(1) CIL regulations must provide for an exemption from liability to pay CIL in respect of a development where—

(a) the person who would otherwise be liable to pay CIL in respect of the development is a relevant charity in England and Wales, and

(b) the building or structure in respect of which CIL liability would otherwise arise is to be used wholly or mainly for a charitable purpose of the charity within the meaning of section 2 of the Charities Act 2006 (c. 50).

(2) CIL regulations may—

(a) provide for an exemption from liability to pay CIL where the person who would otherwise be liable to pay CIL in respect of the development is an institution established for a charitable purpose;

(b) require charging authorities to make arrangements for an exemption from, or reduction in, liability to pay CIL where the person who would otherwise be liable to pay CIL in respect of the development is an institution established for a charitable purpose.

(3) Regulations under subsection (1) or (2) may provide that an exemption or reduction applies only if specified conditions are satisfied.

(4) For the purposes of subsection (1), a relevant charity in England and Wales is an institution which—

(a) is registered in the register of charities kept by the Charity Commission under section 3 of the Charities Act 1993 (c. 10), or

(b) is a charity within the meaning of section 1(1) of the Charities Act 2006 (c. 50) but is not required to register under section 3 of the Charities Act 1993 (c. 10).

(5) In subsection (2), a charitable purpose is a purpose falling within section 2(2) of the Charities Act 2006 (c. 50); but CIL regulations may provide for an institution of a specified kind to be, or not to be, treated as an institution established for a charitable purpose.”

The noble Baroness said: My Lords, I wonder whether the House will allow me, in speaking to the government amendment in this important group, to address the opposition amendments at the same time, given the time of the evening—if I can make sense of what noble Lords have been seeking as well.

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I am very pleased to bring forward Amendment No. 136AA in response to many noble Lords having asked for 100 per cent exemption for charities. I emphasised during Committee that this is a highly complex area in which to legislate and achieving our objectives has required a complex amendment. I am very grateful to the Charity Tax Group and to the noble Lord, Lord Cameron, who provided invaluable advice during the process. However, there are consequently some elements of the provision which I need to explain.

Essentially, this new clause places a duty on the Secretary of State to provide in regulations a 100 per cent exemption from CIL for relevant charities in England and Wales in the case of developments to be used wholly or mainly for their charitable purposes. For example, it will cover many developments used by a charity in connection with its primary purpose: a hostel for the homeless, in the case of a homelessness charity, for instance, a lifeboat station or a building used only as a head office. In addition, it will allow regulations to make exemptions for other institutions established for a charitable purpose and for regulations to require charging authorities to make exemptions or reductions for such institutions.

We listened closely to the concerns raised in this Chamber that the duty placed on the Secretary of State to provide some sort of exemption or reduction in CIL for charities, or developments for charitable purposes, did not go far enough. We listened to the fears of noble Lords and of organisations such as the Charity Tax Group, that regulations would not provide the level of protection from being financially disadvantaged by CIL that we all know they deserve and need to ensure that they work as effectively as possible for the good of the community. We have acknowledged the inevitable confusion that some people had about the meaning of “charity” and “charitable purpose” by specifically providing definitions.

I believe that this amendment delivers the reassurance the charity sector has been asking for. Subsection (1) of the new clause provides a guarantee that CIL regulations must include a 100 per cent exemption from CIL where the liable party is a,

and the development is to be used wholly or mainly for its charitable purposes.

Our amendment also seeks to resolve any confusion on which charities and charitable purposes are covered by the exemption. Subsection (1)(b) makes it clear that the qualifying charitable purposes will be as defined in Section 2 of the Charities Act 2006, while the effect of subsection (4) is that charities registered with the Charity Commission, or which are excepted or exempt from the duty to register with the Charity Commission, will be covered by the duty in subsection (1). We have listened to the point raised by noble Lords in our previous debate on this issue that these definitions must be made explicit in the Bill.

In addition, we have provided a power in subsection (2) for regulations to go further than the duty imposed in subsection (1). Subsection (2)(a) is intended to enable regulations to provide a CIL exemption for charities where the conditions laid out in subsection (1) do not apply. It provides a power in CIL regulations to provide

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an exemption in CIL to other institutions established for charitable purposes. Subsection (5) defines such purposes as those falling within Section 2(2) of the Charities Act 2006 and allows CIL regulations to add or remove institutions from this definition. I shall explain that a little further.

While the outcome of discussions with the EU over other UK charity tax exemptions remains unresolved, we need to allow regulations to be flexible enough to reflect the possible outcome that UK exemptions may need to be extended to EU equivalents of UK charities should it be necessary. We would also like to have the flexibility to include charities from Scotland and Northern Ireland which choose to develop in England and Wales. One of the effects of subsection (2)(a) is that we would be enabled to do this. Achieving this in the Bill is easier said than done, however. Definitions of charities and regulations on the sorts of activities which they may engage in are significantly different in Scotland, for example, and it is highly likely that this is the case for other EU charities as well. Therefore, we need the flexibility offered in subsection (5) to ensure that regulations could include in this exemption charities from outside England and Wales whose purposes are comparable to those in the Charities Act 2006 and exclude organisations which would not be comparable. This will require extensive discussions inside and outside Government and is a matter best left for regulations.

I am sure that noble Lords will want me to explain the purpose of subsection (2)(b). Under this subsection, a power is provided to require charging authorities to make arrangements for an exemption or reduction to CIL for institutions established for charitable purposes, as defined in subsection (5). This is there for a purpose but it does not dilute the commitment to 100 per cent exemption contained in the duty in subsection (1).

Many noble Lords were concerned by the possibility of a reduction rather than a full exemption from CIL being offered to a charity. Indeed this goes to the heart of Amendment No. 136AF in the name of the noble Lord, Lord Cameron, which removes “reduction” from subsection (2) to preclude the possibility for CIL regulations to require charging authorities to provide a reduction in CIL, effectively ensuring the power in subsection (2)(b) could only be used to provide a 100 per cent exemption in every case.

It is essential that we allow ourselves the ability to require charging authorities to provide reductions in CIL where giving full exemptions would violate EU state aid law—in particular where a full exemption would exceed the €200,000 de minimis level of state aid allowed in any three-year period. That would apply only where a charity was engaged in an economic activity, was in competition with other undertakings and was engaged in an activity where there is trade between EU member states. The provision mentions reductions because that is what we want to be in a position to provide if a full exemption is not possible. On that basis I hope the noble Lord will not press his amendment.

11 pm

Finally, subsection (3) permits regulations to provide that an exemption or reduction under subsections (1) and (2) applies only if specified circumstances are met.

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I fully acknowledge that the language in this caveat may cause noble Lords to question why it is there. Let me put on the record that we do not intend to use this provision to find some general way out of providing an exemption of the sort specifically required under new subsection (1). Indeed we could not lawfully use the powers there to render the duty in subsection (1) meaningless or hollow. Subsection (3) is there for specific purposes and is particularly necessary given the complexity of the charity sector both within and beyond the UK. We envisage its primary use is to deal with circumstances where the exemption could be used by a non-charitable body to avoid paying CIL and to ensure all reliefs given meet the criteria set out in EU law, particularly on state aids.

The penalties for failing to take account of state aid law, for instance, could be dire with charities potentially being forced to repay any illegal relief they had been granted, plus the interest accrued on it. I do not wish to put charities at risk in this way. We must have this flexibility, not least because CIL does not feature in a Finance Bill and therefore cannot be amended through primary legislation as quickly as other charitable reliefs. In addition, noble Lords will know there are still aspects of CIL which need further detailing in regulations and which this exemption may need to take account of. It goes without saying that we will continue to work closely with the local government and charity communities in framing these regulations. We have listened closely and will continue to listen carefully to feedback on the proposed details of our exemption when it is consulted on as part of the draft regulations.

This amendment provides a response to the concerns so eloquently raised by noble Lords on the floor of this House a few weeks ago. It contains a duty to provide a 100 per cent exemption. As with so much of charity law in this very complicated area we have had to lay a complicated amendment which takes into account a range of factors. I hope that noble Lords will not allow this to detract from its central purpose.

I turn briefly to the amendments to my Amendment No. 136AA tabled by the noble Lords, Lord Cameron and Lord Dixon-Smith. Amendment No. 136AB would remove the words “wholly or mainly” from subsection (1)(b) of government Amendment No. 136AA, meaning that a 100 per cent exemption from CIL for a charity applies where a development is to be used, to an unspecified degree, for the charitable purpose of the charity.

Lord Dixon-Smith: My Lords, the noble Baroness is attempting to wind up remarks that I have not yet made. While I have every sympathy with her on the position, there are other noble Lords with amendments in this group. It would be wise if the noble Baroness would desist at this point and let us have our say so that she knows what to reply to.

Baroness Andrews: My Lords, I am happy to move my amendment and I will respond to noble Lords’ amendments. I beg to move.

Lord Dixon-Smith moved, as an amendment to Amendment No. 136AA, Amendment No. 136AB:

136AB: After Clause 202, line 8, leave out “wholly or mainly”

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The noble Lord said: My Lords, I am grateful to the noble Baroness. I feel that I should apologise for interrupting her flow but it was necessary as she does not know what I have to say. I should say at the start that I am grateful to her for Amendment No. 136AA because it moves the Bill forward in a helpful way and provides a substantial degree of immunity for charities. The question is whether that degree of immunity is sufficient. My amendment will enable me to explore those limits further, and I know that noble Lords will want to explore still further.

I remind the noble Baroness that it is a fiduciary duty of a trustee of a charity to maximise the revenue income or asset value. Not least of the problems that CIL might cause, if we accept the sort of exemption provided at the moment, is that the charity might be put into difficulty over the possibility of the future development of, say, a field that may have been left to it. It may originally have been out in the open countryside but subsequently becomes surrounded by development. The only sensible thing would be to develop it, which introduces the question of the best way for the charity to maximise the return on that development. It may be for exclusive use for charitable purposes. If it was a charitable housing operation that might be sensible but if it was a particular type of housing, perhaps like the YMCA, the charity might not be able to take up use of the whole site.

Taking out the words “wholly” or “mainly” would go a long way towards overcoming that. But the trustees may find that maximising the return on that asset could involve commercial development and use for a commercial purpose by providing a revenue stream for the charity. That would be likely to produce greater revenue for the charity than selling the site with a liability to CIL. The question I need to explore with the noble Baroness is whether such a “commercial development”, which aims to produce a revenue stream for the charity and which of course would be used for charitable purposes, is included in the exemption. As I read Amendment No. 136AA, it would not. Therefore, the possibility of the arrival of CIL puts trustees of a charity in a difficult situation vis- -vis their fiduciary duty.

That may be wild imagination at work but, in my experience, we have to deal with the wilder flights of imagination. When I was heavily involved in local government some of the most productive time we spent was considering how people might defraud the county council. We had some fairly wild flights of fancy on that trip but we saved a lot of trouble as a consequence. We were able to put in place steps that inhibited such operations happening. We need to think about these possibilities. The real question is how far this exemption goes and where its limits are. It obviously extends to developing a site exclusively for use “for a charitable purpose”. That is fine, but then we have this extension if it were to produce a revenue stream to support the charity. Is there a point beyond that? I do not know.

The noble Baroness may find these technical questions difficult to answer tonight and say that she wants time to consider them and come back at a later

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stage. If that suits her it would be perfectly acceptable to me. At this hour of the night it might save a deal of bother, but I do not know what other noble Lords have to say as they have yet to speak. I beg to move.

Lord Cameron of Dillington: My Lords, I rise to speak to my amendments in this group. First, I must thank the Minister for her efforts to overcome our concerns on this issue. I recognise that our desire to exempt charities from the potentially devastating consequences of this levy has caused her and her team some difficulty. We do not really understand that difficulty, and our resolve to get this matter right has not been diminished. She mentioned European state aid. The advice we have had from our legal side is different from hers. As I said in Committee, I strongly believe this whole thing is the UK gold-plating. After all, there are exemptions for charities from income tax, capital gains tax, stamp duty and land tax, an 80 per cent exemption for council tax and exemptions from virtually every other tax in every other member state in Europe, and they have not been challenged. I cannot see this being a problem at all. We have to stick to our amendments as we have laid them down. I shall not repeat all the reasons why charities need exemptions, as I said enough about that in Committee, but suffice it to say that charities are exempt from virtually all other taxes.

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