New Clause 2

Finance Bill – in a Public Bill Committee am 1:45 pm ar 7 Mehefin 2007.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Trustee residence

‘(1) Section 69 of the Taxation of Chargeable Gains Act 1992 is amended as follows.

(2) In subsection (2D) for the words after “were resident in the United Kingdom” substitute the words “in relation to the settlement unless the general administration of the trusts is ordinarily carried on outside the United Kingdom.”.’.—[Mrs. Villiers.]

Brought up, and read the First time.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

I beg to move, That the clause be read a Second time.

The new clause aims to deal with quite a serious problem that has arisen for the UK’s investment and legal services industry as a result of changes made to the Taxation of Chargeable Gains Act 1992 by last year’s Finance Act. The new clause would reverse one of the changes that the 2006 Act made regarding  determination whether a trustee is resident in the UK or overseas by restoring the definition that operated until 7 April this year.

According to a note published on Tuesday by the technical committee of the Society of Trust and Estate Practitioners, the new formulation introduced last year has

“given rise to widespread uncertainty and difficulty.”

The Chartered Institute of Taxation and the Law Society have also expressed support for new clause 2 and the points made by STEP. Strong concern has been conveyed to me by the representative bodies that HMRC has not yet treated the issue seriously enough. That is a worry, considering that the provisions came into force in April this year. One of the reasons that I have tabled the new clause is to ensure that the points expressed by concerned professionals are listened to and properly and fully explored.

Under the old rules, no problem arose where foreign trustees delegated a number of services relating to trusts to subsidiary firms or affiliates in the UK. The rule was that a trust was resident in the UK unless two conditions were satisfied: first, that the majority of trustees were non-resident, and secondly, that the general administration of the trust was ordinarily performed outside the UK.

However, the 2006 Act introduced a number of changes to the test for whether a trustee is resident or non-resident. One of those was the insertion of a new section 69(2D) into the TCGA to provide that

“A trustee who is not resident in the United Kingdom shall be treated for the purposes of subsections (2A) and (2B) as if he were resident in the United Kingdom at any time when he acts as trustee in the course of a business which he carries on in the United Kingdom through a branch, agency or permanent establishment there.”

As STEP explains in the note to which I have already referred, the difficulty with section 69(2D) is the scope of the words

“branch, agency or permanent establishment”,

which it regards as unclear and broad.

The first problem is whether all three terms apply to both corporate and non-corporate trustees. Other legislation with similar provisions has, I understand, tended to apply the “branch or agency test” to individuals and the permanent establishment test to companies. If the Economic Secretary gave us his view on that, it could provide some welcome clarification for those grappling with the legislation. However, even if this matter is resolved, the meaning of the three concepts remains unclear. We are dependent on case law, much of which is relatively old, for the meaning of “branch” or “agency”.

Assistance on determining what amounts to a permanent establishment is found in section 148 of the Finance Act 2003 and in article 5 of the Organisation for Economic Co-operation and Development model tax convention on income and capital, both of which refer to the concept of a “fixed place of business”. That seems particularly relevant to the issues that the Committee is considering.

The approach suggested by the commentary onarticle 5 of the OECD convention indicates that an overseas enterprise must have unrestricted ability to use premises in the UK before those are capable of constituting  a fixed place of business. I have been advised that a number of activities carried on by non-resident trustees, which have caused no problem in the past, could arguably now give rise to the conclusion that a fixed place of business is being used and a permanent establishment has been set up within the meaning of section 69(2D). I have to stress that it is not clear that such activities would bring a trustee under the terms of section 69(2D), but there is a substantial risk that they would. That is certainly the advice that such people are receiving from their legal advisers. Activities at issue, include the regular use of office premises of a UK affiliate for discussions with professional advisers and other meetings that are, perhaps, incidental to the management of the trust and its investments. Another problem area is the use of a UK affiliate’s accountancy services in preparing trust accounts. That could cause a problem, as could the use of an affiliate’s investment management services. The risk remains even where the services and facilities are provided by the UK affiliate at a market rate and on arm’s-length terms.

The consequences of a trustee falling within section 69(2D) and inadvertently becoming UK resident are serious. Put simply, non-resident trustees who use UK affiliates to carry out any back-office functions now risk bringing their trust within the UK tax net when it would not otherwise be so. The trust would therefore be within the scope of UK capital gains tax on all future gains. The gravity of the problem becomes even more apparent when one takes into account the fact that there is no CGT uplift where a trust becomes UK resident. That means that all gains are taxable on future disposals, including those accrued before the trust became UK resident.

Photo of Rob Marris Rob Marris Llafur, Wolverhampton South West

I bow to the hon. Lady’s much superior knowledge on this matter, but on reading the amendment and listening to her it appears, prima facie, that she is arguing for a tax break for the rich who have gone offshore. Is that so?

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

No, it is not. Just to pre-empt any misunderstanding on what section 69(2D) is about, I make it clear that I do not think it is about anti-avoidance. Obviously, we will hear from the Economic Secretary, but there is, correctly in my view, extensive legislation in place already to prevent UK residents from using offshore structures—whether trusts or anything else—to reduce their tax bill. It is right that we have that legislation. If there are any remaining gaps in that anti-avoidance legislation, I would support the Government in plugging them. However, I am not persuaded that this measure is aimed at that problem.

We are talking about whether the UK can retain a share in international trust business, which is an important professional services market provided to people from overseas setting up international trusts. It is not primarily, or really at all, about UK residents. The current anti-avoidance provisions are effective. This is an international industry providing services to people who usually have little or no connection with the UK. Again, I would be interested to hear what the Economic Secretary has to say. He may be able to explain the anti-avoidance aspect.

I pick up where I left off. If the trustees fall under section 69(2D), they cannot solve the problem by  becoming non-resident; if they do, all unrealised gains would become chargeable. In its note of 5 June, STEP says:

“Non-UK trustees will not take the chance of being deemed to be UK resident and work which would otherwise come to UK professionals would be sent elsewhere...And business once lost is hard to regain.”

We need to give serious consideration to that warning.

The Opposition fear that the adoption of a permanent establishment test is inappropriate. It seems to have been lifted from corporation tax rules, which provide that when a non-UK company carries on business in the UK through a permanent establishment, the company will be taxed on profits earned through the permanent establishment. That seems reasonable. However, lifting the terminology into the context of trusts will have serious and far-reaching results, although I suspect that they may be unintended. If a trustee oversteps the mark only marginally, so that his activities come within the scope of the permanent establishment test, it would cause the trust to be UK-resident for all purposes—all the gains that it made and all its income, whether connected with the UK or not, would be liable.

Photo of Adam Afriyie Adam Afriyie Ceidwadwyr, Windsor

It strikes me that the Government recognise the international competition in corporation tax rates, and to ensure that the UK remains effective, they have reduced them by 2 per cent. There is international competition also in the provision of services to those who support and provide services for international trusts. Does my hon. Friend agree that we run the risk of losing those businesses if the provision goes through as it is?

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

I agree. My concern is that our competitiveness will be undermined, but no clear reason has been given as to why that step was taken in last year’s Finance Act. There may be a good reason for UK jobs being lost—it may be worth the price—but I am not yet persuaded of the justification for making the change.

I turn again to the consequences of section 69(2D) remaining unamended. If one took the same approach to international companies as the 2006 Act applies to international trusts, companies that carried out only a few back-office functions in the UK would have all their worldwide profits and property dealt with under the UK tax system. That would be nonsense for companies, and it is causing a problem in the trust context. All the gains of trusts would be taxed here, even if they became resident here for only one day.

New clause 2 seeks merely to restore the general administration test that applied up until the Finance Act 2006. Not many would assert that the old test was perfect—it had some well-known drawbacks—but it proved to be workable for the 40 years that it was in operation. There seems to be a degree of confidence in the test, given that it operated well in most circumstances. Whatever interpretative problems there might have been were significantly less serious than the concerns centred on section 69(2D).

Issuing HMRC guidance is not the answer. Although further guidance on what the provision means—from HMRC, or indeed from the Economic Secretary this afternoon—would be welcome, it would not resolve all  the uncertainties. It would provide insufficient protection for trustees, given the significant liabilities involved if a trustee inadvertently brought the trust within the UK tax net. Even if HMRC stated clearly that none of the back-office functions that I have outlined would trigger the operation of section 69(2D), the result would still be less than satisfactory. In effect, the outcome would be that trusts having no connection with the UK would be liable for UK tax under section 69(2D), but would be let off—essentially at the Revenue’s discretion.

We should remember that almost all trustees would be personally liable for the extra tax that the trust had to pay as a result of changing residence. Professionals would not take that risk. Indeed, as my hon. Friend the Member for Windsor pointed out, the change in the law made under last year’s Finance Act has significantly undermined the UK’s ability to compete in the market for international trust business. I am informed that the change is already leading to jobs being lost in the United Kingdom.

I acknowledge that thus far my evidence is anecdotal, but I have received a number of reports of accounting services being shifted offshore with data inputting going to Bangalore and investment services going to Geneva. For example, I have been informed that, following a meeting with the Revenue to discuss the issue, one of the industry representatives went straight back to his office afterwards and issued redundancy notices to six bookkeepers on the spot and put in place measures to close within six months the facilities that he used in London with a loss of 40 jobs in total.

We have special expertise in trust matters in the United Kingdom. After all, it was an English invention. I shall spare the Committee my treatise on the cultural jurisprudential importance of trust business, given that it received it several times last year. The expertise has given us a significant edge when competing for international trust business. It is a large industry. It is a highly competitive and mobile area of the international market for professional services. I am told that our competitors overseas are delighted at the developments in our law and are advising their clients not to use the UK for any trust-related services. A significant number of jobs in the UK depend on the business and they are being put in jeopardy for no good reason.

We now reach the key point, to which I referred in response to my hon. Friend the Member for Windsor. It is simply not clear why the change to the definition was made. If section 69(2D) was performing an important anti-avoidance function, perhaps it would not matter if it meant that jobs were lost in the UK and offshored to India and Switzerland.

I hope that the Minister will accept the new clause. If not, I hope that he will consider rectifying the matter on Report or at some future stage. Failing that, he should at least explain why section 69(2D) is necessary and say what important function it is performing, because I cannot see what it is.

The STEP technical committee appealed that

“the permanent establishment test needs to be urgently reconsidered”.

I hope that the Minister will give us a commitment that he will do as it asked.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury 2:00, 7 Mehefin 2007

I know that the hon. Lady has expertise and a detailed interest in trust matters. The tax rules for determining trustee residency were amended under the Finance Act 2006 as part of the trusts modernisation package. The new regime took effect from 6 April 2007. The new clause would amend the changes to trust residency that were made into legislation last year. As she explained, the 2006 legislation replaced separate income tax and capital gains tax residency tests with a common test to ensure that all trustees have the same residence status for income tax and capital gains tax purposes to make it easier to comply with the tax system for trusts. The changes also dealt with concerns that professional trustees in overseas institutions were able to develop a substantive UK presence while remaining non-resident for tax purposes.

The new residency test was introduced in the Finance Act 2006, but we made it effective from April this year as we wanted to give trustees time to reorder their affairs to retain the residence status that they wanted and to avoid complex transitional provisions. There was considerable consultation and time to prepare for such matters, and I am not sure whether the employment practices described by the hon. Lady in one instance are really the sort that any member of the Committee would condone.

Photo of Adam Afriyie Adam Afriyie Ceidwadwyr, Windsor

It strikes me that the Economic Secretary is casting aside some of the genuine concerns about the UK’s loss of competitiveness in the industry. Will he lay out the research on which he based his statements? How many people does he estimate will be affected by the changes?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

Given that I have not even said whether we will accept the new clause, but have just stated what has happened during the past year, the hon. Gentleman is jumping to conclusions. If he gives me the opportunity to make my speech, perhaps he will then know whether I have addressed that question.

The new common residency test is based on the old income tax test. It was chosen because it provides a simpler and clearer test to determine the residence position of the trustees as a body. It includes a provision that a non-resident trustee will be treated as a resident trustee for tax purposes when he or she acts as a trustee in the course of a business carried on through a UK branch, agency or permanent establishment.

We are aware that the Society of Trust and Estate PractitionersSTEP—the body that organises on behalf of the practitioners, has expressed concern about the permanent establishment test, and in particular its potential effect on non-resident corporate trustees. I understand that such trustees may well have an associated company in the UK whose offices are made available for meetings with settlors, beneficiaries or investment advisers or which are used as a base for other UK operations. The legitimate concern appears to be that such activity could result in non-resident corporate trustees doing business in the UK losing their non-resident tax status.

The Committee will be pleased to learn that HMRC is engaged in ongoing discussions with STEP on that matter. Whether trustees will be regarded as having a permanent establishment in the UK will depend on the circumstances in each case and the extent to which that is legitimate. To provide as much help as possible for taxpayers, following those consultations, which have involved STEP and other practitioners for some time, HMRC will, as a priority, issue guidance on the new rules to ensure that legitimate business is not being captured. People engaged in legitimate business would be better off waiting until the consultation has ended and the guidance has been issued before they issue redundancy notices.

As part of the work on guidance, HMRC is carrying out detailed analysis of the issues raised by STEP to ascertain the nature and extent of any issues affecting non-resident corporate trustees. This is a complex area that requires detailed discussion. The discussions are ongoing, and once the analysis has been completed and studied carefully by HMRC, we shall issue guidance. We shall not issue it until we have reached conclusions, and no firm conclusions have yet been reached.

It is worth noting that the trusts modernisation legislation in the Finance Act 2006, including the new residency test, was consulted on twice before it was introduced. Although many respondents, including STEP, agreed that a common test was desirable, they expressed a preference for a rule different from that eventually introduced. I have set out that for the purposes of simplicity, and to ensure that proper practice was supported and illegitimate practice was not, we legislated as we did.

Photo of Adam Afriyie Adam Afriyie Ceidwadwyr, Windsor

I hope that the Economic Secretary will not jump down my throat as he did when I made a genuine inquiry about why he did not appear to be concerned about the competitiveness of the sector, but his comments once again seem to cast aspersions on anybody who makes a decision to close their operations in the UK before the guidance is issued. It is not wise, in an area of uncertainty, given that the repercussions are enormous for businesses, for them to make decisions early, even if there is no certainty about whether the decision is the right one in view of when the guidance is issued? Such an approach would seem to be sensible, as opposed to being a dodgy thing to do, as he seems to be suggesting.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

It is not for me to second-guess the business decisions of any individual company agency, and the hon. Member for Chipping Barnet did not tell us the precise circumstances. Our intention is to ensure that people who are acting as offshore trustees but who, for other purposes, legitimately have business dealings, and therefore premises, in the UK are not unfairly discriminated against by any change. Consultation and detailed discussion is taking place, so anybody who is acting within the intent of the law will not be unfairly impacted by these matters, whereas people who are clearly seeking to use the arrangements to avoid tax will be.

I say to the hon. Lady and to my hon. Friend the Member for Wolverhampton, South-West that in this complex area there is the potential for considerable tax avoidance. We do not intend to allow that avoidance to occur. At the same time, the purpose of the consultation  is to ensure proper and detailed guidance, so that people are not unfairly and unintentionally caught by the definition.

The hon. Lady asked whether the definitions apply equally to corporate and non-corporate trustees, to which the answer is that branch, agency and permanent establishment applies to both. She also asked about the OECD test, which is used for working out the definitions of permanent establishment for corporation tax purposes. She is right: the OECD manual has the best definition, which sets out what is meant by permanent establishment. Although the examples given in that manual relate to companies, which is normal because most OECD members do not legislate for trusts, the conclusions can be adapted for trust business. The analysis that HMRC is preparing will examine the definition and how it can be applied to trusts. HMRC will share that analysis with STEP in the coming weeks as it consults on the detailed guidance to which I have referred.

The hon. Lady and the hon. Member for Windsor asked whether we are setting out to damage the competitiveness of the UK as a financial centre. No, we absolutely are not; we always intend to ensure that London maintains its competitiveness as a global financial centre, across a range of tax regulatory matters. London is highly respected around the world as a global financial centre partly because it is a well-regulated, proper place to do business, whose rules, legal system and tax system require high standards of integrity and probity. It is important that there is no ambiguity, which can send the wrong kind of messages. We have no intention of doing anything to damage our competitiveness, but we need to get the measures right.

STEP has provided HMRC with individual cases in which it believes people have been unfairly caught. HMRC is studying the analysis of those examples as it draws up the guidance. I have no statistics on the extent of the potential tax avoidance, but our integrity and probity depend on us taking a robust approach towards it. Many opportunities for tax avoidance in this area can be prevented.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

Will the Economic Secretary give an example of tax avoidance that will be countered by section 69(2D) of the Taxation of Chargeable Gains Act 1992?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

As I was going on to say, it is not the job of the Government to anticipate on behalf of the industry where the opportunities for tax avoidance might arise.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

If the hon. Lady would let me answer her previous point, that might help her to prepare her next intervention. It is not our job to lead the tax avoidance industry down such a road. There are many sophisticated lawyers and accountants; many of them work in legitimate business areas, but some of them seek ways in which the law can be pressed in a particular direction. HMRC judges that this issue could present many opportunities for tax avoidance, and that it would be wrong for the Government to take measures that would further support and advantage the offshore trust industry. That is not our intention. As I have explained, the purpose of the consultation is to produce guidance that will not damage in any way the legitimate offshore trust industry.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

As the Economic Secretary could not give the examples that I asked for, can he give any examples of tax avoidance schemes that have been shut down as a result of section 69(2D) of the 1992 Act?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I chose not to give the hon. Lady, or the wider public, examples of the kind of tax avoidance that HMRC believes might be opened up by the proposed change. I do not think that that is the role of Ministers; it is not for me to provide such an advisory role.

Photo of John Hemming John Hemming Democratiaid Rhyddfrydol, Birmingham, Yardley

Is it not the role of Ministers to justify their arguments? If the Economic Secretary cannot cite a loophole that the new clause would create, he cannot justify his argument.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

To take the hon. Gentleman back to the beginning of my speech, we legislated for the measure in last year’s Finance Bill, not this year’s. We legislated following two lengthy consultations, and we justified fully at the time why, in order to simplify the tax system, to create a definition common to income and capital gains and to ensure that we properly supported the legitimate business of offshore trust practitioners without allowing people to get around the rules, that was the better way to go.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury 2:15, 7 Mehefin 2007

Let me answer the point and then I shall take another intervention.

STEP and some advisors put it to us that in the early weeks of the measure’s eight-week implementation period, which began in April, some people feared that the way it was being implemented could impact on legitimate business. The right thing to do when those fears—including specific case studies—are raised is to begin discussions immediately. I have made it clear that discussions are ongoing. There will be full consultation and we will issue guidance to ensure that legitimate business is not affected, while preventing tax avoidance by people claiming to be offshore and for tax purposes a trustee, but who have premises to do effectively the same business here in the UK. We were clear last year that we would not condone it. The right thing to do is to consult and to come forward with guidance. My argument is that it would be premature to pass a new clause that took us back to where we were before last year’s Finance Bill when we are still consulting to ensure the right guidance. I am happy if the hon. Gentleman wants to intervene again.

Photo of John Hemming John Hemming Democratiaid Rhyddfrydol, Birmingham, Yardley

To be fair, that is a more substantial argument, but the Economic Secretary argued earlier that the new clause would allow opportunities for tax evasion and he did not cite any such opportunities. The point is that the new clause has not been passed, so the opportunities do not exist. However, there is a different argument that the objective could be achieved through guidance. That is an arguable case, whereas the other case is not. Whether it is a true case is another question.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

To repeat what I said: we acted last year because we feared that without the change, there would  be complexity and potential avoidance. We have consulted and acted, but to ensure that legitimate business outside the intentions of the Finance Act 2006 is not unfairly caught, we are consulting to produce guidance. My argument is that it would be premature to legislate today to return us to where we were before last year’s Finance Bill when we are still consulting on detailed guidance to ensure that the intentions of the 2006 Act are properly implemented. On the basis of eight weeks’ experience, it would be a premature decision.

STEP has a choice. It can either brief shadow Ministers to try to reverse legislation that the House has enacted, or it can engage in detailed consultation with HMRC to ensure that its legitimate concerns—

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

Hang on. Let me just finish my point.

STEP can engage in detailed consultation with HMRC to ensure that its legitimate concerns are properly addressed. The consultation is ongoing, and STEP and the practitioners would be better off engaging in the consultations, working with us on the guidance and through the examples and deciding at the end of that process whether it provides them with the clarity that they want, rather than supporting a return to the status quo ex ante.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

STEP has engaged in extensive correspondence and discussions with HMRC, but I should like to ask the Economic Secretary whether he is threatening the professional organisations and saying that they should not engage in discussions with the Opposition, because that seems to be a wholly undemocratic approach.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

To an extent I understand the point, but I disagree with it. My point was that STEP and the practitioners have a choice. They can either engage positively and constructively to get the guidance right, or they can walk away from the whole process and call for the legislation to be repealed. The former option is a better approach. The latter, at this stage, would be premature. However, I can see why they are going to run with both options.

My view is that the detailed consultation is the right approach. Therefore, I urge the Committee to reject new clause 2 because I think that it is both premature and mistaken. It is not the right way to go. If, after the consultations, STEP concludes that it is satisfied with the guidance, it can encourage the Opposition to come forward with further amendments to future Finance Bills. To do so now, while we are in the middle of a consultation, is a mistake. Therefore, I urge the Committee to reject the new clause.

Photo of John Hemming John Hemming Democratiaid Rhyddfrydol, Birmingham, Yardley

We have had this system in place for eight weeks. This Finance Bill will be implemented in about a year, so the consequences of the status quo will be fully impacted by the time there is another Finance Bill. There is an opportunity to change it now. If guidance does not facilitate dealing with the issue, it will be too late in a year’s time. We are not going to hang around.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

Frankly, I am shocked by the exchange we have just had. It is outrageous for the Economic Secretary to say that representative bodies, or anyone who is interested in democratic scrutiny of our tax legislation, face the choice of either engaging constructively with the Treasury and HMRC, or briefing and advising the Opposition on amendments. That demonstrates contempt for the Committee’s deliberations and I think it is regrettable that the Economic Secretary made those comments.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I never suggested that STEP had briefed the hon. Lady on an amendment. I said that it had briefed the hon. Lady on a new clause to reverse last year’s Finance Bill and therefore to reverse the very piece of legislation on which we are currently engaged in a consultation to provide guidance. That is quite different from an amendment. The question is, do we go back to where we were before 2006, or do we make the consultation process work? All I was saying was that it was better to consult to provide decent guidance to avoid the concerns of the hon. Member for Birmingham, Yardley. That seems to be a more constructive approach to making tax policy.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

I fail to see how it can be incompatible to engage in the closest, extensive and most constructive negotiations with HMRC and at the same time advise and express concerns to Opposition spokesmen. Any suggestion that those two are incompatible is fundamentally undemocratic and show insufficient regard for the process in which we have been engaged for three months.

It is also regrettable that the Economic Secretary could not answer either of my questions. He could produce no examples of avoidance schemes that would be shut down as a result of section 69(2D). He was unable to give evidence of any avoidance that had occurred as a result of the old test, which has been in operation for 40 years and which new clause 2 would restore. He emphasised that it was important not to have ambiguity because it sends out the wrong signals in our law. Well, we have ambiguity that sends the signal that the UK is no longer open for this type of business. I am willing to bet that people will receive redundancy notices as a result of the discussion that we have had in Committee and the Economic Secretary’s remarks today.

The Economic Secretary also made it plain that the decision on the permanent establishment case would depend on the circumstances of each case. That again confirms the uncertainty to which trustees are subjected. They have no way of telling in advance whether their case will be affected by the provisions. I am pleased that he said that attention was now being directed to this matter with HMRC. I hope that that attention will be directed to the issue as a matter of urgency.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury


The Economic Secretary said that it would be premature to act now. People are losing their jobs right now as a result of this legislation. That is why I tabled  new clause 2. I will not press it to a vote, because I tabled it in order to draw this serious problem to the attention of Ministers and officials. I am grateful that the Economic Secretary is going to carry out further consultation. He refers to a consultation happening at the moment. So far as I am aware, there is no formal consultation going on. However, I understand his words to mean that there will be a formal consultation, and I hope that he will move to resolve the issue as a matter of urgency. I remain convinced that it will not be possible to resolve it with any certainty or finality until we have a legislative change. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.