Clause 225 - Miscellaneous reliefs etc

Finance Bill – in a Public Bill Committee am 8:00 pm ar 26 Mehefin 2012.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Peter Bone Peter Bone Ceidwadwyr, Wellingborough

With this it will be convenient to discuss:

That schedule 38 be the Thirty-eighth schedule to the Bill.

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury) 8:15, 26 Mehefin 2012

I hope not to take too much of the Committee’s time, notwithstanding the fact that the clause and the schedule deal with a number of repeals of miscellaneous reliefs following the Office of Tax Simplification review of reliefs.

On reading the background notes, I immediately spotted the word “nationalisation” and wondered whether something was being slipped in that I ought to take a closer look at. However, it turned out to be something fairly innocuous in relation to exemption of stamp duty for instruments connected with nationalisation schemes.

The clause goes through in some detail a number of what ought, as I understand it, to be tidying up arrangements. I was surprised by some of the things that I found. I had no idea, for example, that a previous Labour Government had introduced a scheme whereby, on certain designated days, people who cycled to work were able to have their breakfast provided courtesy of their employer without incurring any liability for tax. That is now to be repealed.

I understand from the background notes and the information provided that very few people took up the option of a cyclist’s breakfast and in the consultation process no one suggested that that particular section ought not to be repealed. Perhaps the Minister will think differently, and perhaps hon. Members will say whether they have ever taken up that opportunity to have a cyclist’s breakfast, six of which they were entitled to during the course of the year.

Another tucked-away item is a reduction for meal vouchers. Perhaps the Minister will spell out exactly what that particular repeal will mean for people who currently receive such vouchers from their employer. On black beer, which I know has been raised in the Chamber on occasions, there has been concern about the way in which that is dealt with in the Alcoholic Liquor Duties Act 1979. Paragraph 51(2)(a) amends the definition of beer by removing the exclusion for black beer, making black beer liable to excise duty.

Mr Bone, I do not always simply talk about alcohol. I hope people will not think that as I move on to Angostura bitters. Paragraph 52(1) repeals section 1(7) and section 6 of the aforesaid Act, which deems Angostura bitters not to be spirits for certain duty purposes. Will the Minister clarify the situation that will arise as a result of that?

There is one other issue that I want to raise. [Interruption.] I am hearing lots of comments.

Photo of Peter Bone Peter Bone Ceidwadwyr, Wellingborough

Order. I am sorry to interrupt, but some private conversations are going on.

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

I am hearing private conversations. On that note, perhaps it would be a good point for me to interject and say to people that I understand from my research and as an avid follower of the Committee that some private conversations were broadcast across the internet before the Committee started this evening, because the broadcasting was in place. Perhaps people may want to think about what they said and whether it is going to be out there for ever. Perhaps they will cease their private conversations.

Photo of Charlie Elphicke Charlie Elphicke Ceidwadwyr, Dover

I assure the hon. Lady that I was entirely complimentary about her at all times. For the benefit of the Committee, our debate here was about what exactly Angostura bitters are and whether it is really the case that millionaires use them.

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

I will resist the temptation to read out the entire background note that gives the definition. I am sure that if anyone wishes to find that out, they will indeed go and sample the aforesaid beverage.

Photo of Ian Mearns Ian Mearns Llafur, Gateshead

I had some experience working in the bar trade some years ago. Angostura bitters were often used as a means of coating a glass and making gin pink, among other things. They were also used as a hangover cure when mixed with tonic, but it has to be taken in very small quantities.

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

Like other Members, I am absolutely indebted to my hon. Friend for that information; I hope that none of us will have cause to seek out that particular cure tomorrow morning.

Let me move on to another area about which concern has been expressed—mineral leases and agreements. The Institute of Chartered Accountants expressed concerns about the clause and the withdrawal of relief in its response to the Treasury’s May 2011 consultation. It welcomed the fact that the Government had decided to retain existing treatments for some current agreements. However, it felt that some of the underlying policy reasons for supporting the continued treatment of mineral  royalties under the existing rules, which the Office of Tax Simplification supported, remained valid. It is therefore concerned that the proposals might discourage owners from allowing mineral extraction on their land, restricting supply, pushing up prices and potentially cutting across the Government’s growth agenda. In the light of that latter phrase, perhaps the Government will want to respond in some detail, given that they will be concerned about getting their growth agenda, which has not been successful, back on track. [Interruption.] As was just suggested from a sedentary position, it is actually a question of getting that agenda started.

When the response to the May 2011 consultation was submitted, the ICA suggested that if the relief was to be abolished, royalty relief for existing quarries should be phased out over an extended period of, for example, five years. It suggested that, as the measures are due to take effect in 2013, consideration be given to deferring the proposal’s start date by a further year, and that in the meantime a detailed study be undertaken to see whether withdrawal of the relief would impact on the future availability of land for mineral extraction. I have lost count of the number of times we have asked for studies or reports, and I hope the Minister will listen to this suggestion, because it is not simply me who is making it. If he could answer those points, that would be helpful. I have resisted the temptation, as I said, to go through every one of these repeals individually.

Photo of Nigel Mills Nigel Mills Ceidwadwyr, Amber Valley

I want briefly to disagree with the hon. Lady about the changes to mineral leases and agreements. Having read the ICA’s submission saying that this change might discourage landowners from bringing forward their land for mineral extraction, I have to say I was quite keen on that idea. Speaking as an MP with a constituency that, rather reluctantly, has one open-cast mine in operation and a planning application for a second one, I wholeheartedly welcome any measure that discourages these awful blights on the countryside, especially where they are far too close to houses, such as the one proposed at George Farm, in my constituency. I therefore urge the Government not to delay or make a U-turn, but to go full steam ahead. The measure is very much to be welcomed.

Photo of David Gauke David Gauke The Exchequer Secretary

Clause 225 and schedule 38 will help to simplify the tax system by removing obsolete and little-used tax reliefs from the tax system. The Government’s objective is to create a tax system that is easy to understand and simple to comply with. That is why we set up the independent Office of Tax Simplification in July 2010—to lead a determined effort to simplify the tax system.

Photo of Ian Swales Ian Swales Democratiaid Rhyddfrydol, Redcar

I suppose it is a sign of the times that this clause is about simplification of reliefs, rather than of taxes. I do not detect the work of the OTS in any of the first 224 clauses. Can the Minister hold out any hope that in future Finance Bills the OTS will get deeper into our very complex system?

Photo of David Gauke David Gauke The Exchequer Secretary

Yes, I can. The OTS has made a good start. It has identified a number of areas where there is further work to be done. At the time of the Budget, for example, HMRC published a paper on the taxation of small businesses that leant very heavily on some of the ideas put forward by the OTS. In a number of areas,  including employee share schemes, the OTS is making a valuable contribution to our tax system. We are all aware, in the course of serving on the Finance Bill Committee, how complex tax can be. It is always a struggle to move towards tax simplification, but the OTS has done some very good work. It has made recommendations on taking steps to improve the administration of IR35. As I mentioned, it has taken steps to improve tax administration for small businesses and, as announced at Budget, steps to simplify the tax system for small and unincorporated businesses.

In March 2011 the OTS carried out a review of tax reliefs. That surveyed all of the reliefs that exist in the tax system and assessed them to identify those that no longer served their rationale or that created unnecessary complications. The OTS discovered that there were more than 1,000 tax reliefs within taxes administered by HMRC alone. It analysed around 155 of those in detail and advised that 43 should be abolished. The Government already abolished in the Finance Bill 2011 seven of those that were found to have expired. The Government launched a consultation last summer on abolition of another 36. We received 78 responses to that consultation, and on 6 December 2011 the Government published their response.

As a result, the Government confirmed full repeal of 28 reliefs, 24 of those in this Finance Bill as part of this schedule. This will remove around 90 pages of tax legislation from the books. The remainder will be abolished either through secondary legislation or in the next available national insurance Bill.

Let me explain why we are abolishing some of the reliefs. A number of the reliefs being abolished are now obsolete. For example, a number relate to stamp duty, a tax replaced by stamp duty land tax in 2003. There is no evidence of recent or planned use of the reliefs associated with harbour authorities. The value of the relief for luncheon vouchers is now worth so little that the relief serves little purpose any more. As hon. Members will see, there is little justification to maintain those reliefs.

I will say a little about why we are not abolishing all the reliefs identified. The Government listened to the views of consultation respondents. Where a strong case was made to retain particular reliefs, that was done, although that was restricted to instances in which evidence submitted represented new information that significantly reduced the rationale for abolition. That means that four reliefs will now not be abolished and a further three will be only partially repealed, on the basis that certain rights need to be preserved for legal reasons.

I will touch on some of the difficult decisions, for example, abolishing excise duty relief for Angostura bitters. That historical relief was introduced when Trinidad and Tobago was classed as a developing country. Abolition of that relief will also maintain fairness amongst all producers of bitters, as the current relief benefits one company. I am grateful to the hon. Member for Gateshead for informing the Committee about Angostura bitters. Never let it be said by any hon. Member that they do not learn something while serving on a Finance Bill Committee.

I will briefly touch on the subject of black beer. It is generally of a high alcoholic strength, around 8.5% proof, so in our view it can no longer be considered a health product, which was the justification for a lower rate, despite the arguments that might be made on that.

As far as mineral royalties are concerned, the relief is redundant, and abolition would not discourage landowners from making land available for mineral extraction. I hope that does not disappoint my hon. Friend the Member for Amber Valley. However, we have agreed to preserve capital loss reliefs in respect of mineral leases or agreements entered into before the repeal.

The rates of income and corporation tax are considerably lower than they were in the 1970s. Consequently, the main rationale for introduction of that relief no longer exists.

With those remarks, I hope I can conclude on this point. The Government are committed to simplifying the tax system and the OTS has a major role in helping us meet that commitment. The repeal of these reliefs represents a further step in the work of the OTS and the Government to reduce the complexity of the British tax code. I hope that the clause and schedule will stand part of the Bill.

Question put and agreed to.

Clause 225 accordingly ordered to stand part of the Bill.

Schedule 38 agreed to.

Clauses 226 and 227 ordered to stand part of the Bill.