It is a pleasure to serve under your chairmanship again, Mr Amess. I thank you for your kind, thorough and courteous steering of this morning’s proceedings, which have been altered slightly at short notice. I appreciate the guidance that you have given.

Clause 91 and Amendment 15 relate to the annual tax on enveloped dwellings, which is a new tax on UK residential property valued at £2 million, payable annually by companies, partnerships and corporate partner and collective investment vehicles, including unit trusts. I would like to put into context some of the comments, concerns and queries about this tax that the Opposition wish to raise.

It will be useful briefly to set out how the new annual tax on enveloped dwellings will work. Where it relates to properties worth £2 million to £5 million, the charge will be £15,000; for properties worth £5 million to £10 million, the charge will be £35,000; for properties worth £10 million to £20 million, the charge will be £70,000; and for properties worth £20 million-plus, the annual charge will be £140,000. The tax is part of a range of measures that were announced in the Budget 2012, the stated purpose of which was to discourage the purchase and holding of high-value UK residential properties within companies and corporate envelopes.

Other measures that relate to the annual tax on enveloped dwellings, which I will refer to as ATED, if the Minister is happy with that pronunciation, are a higher rate of stamp duty land tax, or SDLT; a 15% payment on purchases of properties worth more than £2 million by companies and other non-natural persons, which came into effect on 22 March 2012; and the extended reliefs from the 15% charge being introduced by this Bill, which include extending the capital gains tax regime to the sale of UK properties worth more than £2 million by companies and other non-natural persons. That measure came into effect on 6 April 2013. Reliefs in respect of the ATED aimed at genuine businesses carrying on a genuine commercial activity have also been included.

The aim of the annual charge is to encourage individuals to remove high-value properties from corporate vehicles. The Treasury consultation document says:

“The charge will encourage individuals who have put such high value property into envelopes for reasons including tax avoidance to take them out, thereby ensuring that the onward sale of the property is subject to SDLT and a fair share of tax is paid.”

In my review of how the clause will work in practice, I will put a number of questions to the Minister because, fundamentally, there is a question about whether this measure will achieve its aim. I will set out my reasons for questioning that premise.

Often, property-holding structures for non-doms involve offshore companies and trusts to enable them to avoid SDLT. A non-UK domiciled individual who wishes to purchase a high-value UK property may establish a non-UK resident trust to turn into an incorporated non-UK residential company, which can then buy the UK property. The offshore company, which owns the property, can then be sold, which enables that individual to avoid the SDLT charge by not selling the property itself.

Savills’ report said that prior to the introduction of these measures share transfers accounted for 8.7% of second-hand sales of London property worth more than £2 million in 2011, with that figure being 12.4% in prime central London locations. The charge came into effect from 1 April 2013 and the chargeable period will run from 1 April to 30 March. Properties held under that type of corporate structure will be subject to that charge annually. A separate tax return in respect of the annual tax on enveloped dwellings will be required and the return payment must be made to HMRC by 30 April each year.

We understand that this measure is not a mansion tax—it is unfortunate that there are no Liberal Democrat members present for this part of the debate on one of their key policy areas. They came in and went away again; hopefully they will come back before I reach the end of my comments.

We have backed a mansion tax as a measure that could be taken now to change the economic situation, which was a policy strongly supported by the Liberal Democrats. That was a flagship policy on which they campaigned publically until, seemingly, they changing their mind, or their policy priority became confused either in their mind or the public’s mind—I am confused about that.

It would appear, however, that the Chancellor has paved the way for a mansion tax with this measure and the introduction of the ATED and the SDLT, because this is a tax set on high-value properties and not only on those owned by companies or non-natural entities. It is an annual levy, ranging from £15,000 on properties valued between £2 million and £5 million, all the way up to £140,000 on properties worth £20 million. For the first time, owners will be liable for capital gains tax as well as the 15% stamp duty at the point of purchase.

I am pleased to see the hon. Member for Southport return to his place. He missed my disappointment about there being no Liberal Democrats present in the Committee as we are talking about the mansion tax, which is an important policy not just for the Liberal Democrats, but for Labour too.

To use a technical definition, the ATED will be levied on homes controlled through corporate envelopes, rather than those owned by individuals or property developers. Therefore, in March, HMRC sent out 5,000 letters asking owners of some of the most expensive homes in the country to carry out professional valuations of their properties ahead of the looming annual residential property charge. It is estimated that half of those properties are owned by companies based offshore.

It is worth reflecting that the Liberal Democrats have campaigned heavily and repeatedly called for a mansion tax. In their 2010 manifesto, they made a commitment to introduce one at the rate of 1% on properties worth more than £2 million, paid on the property’s value above that level. They estimated that that might raise about £2 billion annually. Labour’s view is that that money could be used to fund the reintroduction of the 10p rate of income tax, which would benefit up to 25 million basic rate taxpayers by up to £100 if used on the first £1,000 above the personal allowance threshold.

When the Lib Dem president, the hon. Member for Westmorland and Lonsdale (Tim Farron), was asked which parts of Labour’s motion in the House he disagreed with, he replied clearly: “None of it.” In considering this clause, we must remember that the Liberal Democrats voted against that motion and for the Prime Minister’s amendment, which neither called for a mansion tax nor did anything to secure one. In fact, the Chancellor has advanced the prospects for a mansion tax far beyond what the Liberal Democrats pledged to do, or have done in practice when given the opportunity to support it in legislation.

One stark feature that I noticed in the summary of the impact to the Exchequer in the tax information note produced by Her Majesty’s Revenue and Customs is that the actual revenue expected from the measure is £75 million in 2013-14, £75 million in 2014-15, £80 million in 2015-16, £90 million in 2016-17 and £100 million in 2017-18, but taking out the cost of the exemptions reduces those figures substantially, giving an overall revenue figure by 2017-18 of £60 million, by my calculations, and obviously much less in 2013-14.

The cost of administering the charge is not clear from the tax information impact note. It seems that many companies that hold enveloped dwellings will be affected, but the cost of administering the charge is not clearly set out. Will the Minister clarify what those charges will be and what extra resources will be provided to HMRC to deal with the additional burden of administering the tax? In reality, the increase in revenue will be small, and one wonders whether the cost of administering the charge will outweigh the revenue received.

The Government’s stated intention when they brought in the charge was to

“encourage individuals who have put such high value property into envelopes for reasons including tax avoidance to take them out”.

There have been queries about whether the charge will have the effect of encouraging people to take properties out of envelopes. It will have a deterrent effect for those entering a new enveloped arrangement, but will those already holding properties in such vehicles have an incentive to remove them from the enveloped dwelling structure, given that various charges are associated with such a change? Obviously, there will be an annual charge on anyone holding them within the envelope  structure, but any charges that may be incurred by removing them from the envelope structure, and putting them into a new legal structure that would avoid the annual charge, could incur capital gains tax or other charges associated with that.

We support the concept of a mansion tax and the measures in the Budget to clamp down on that form of tax avoidance, but it is important that we are realistic about the extent to which they will achieve the aims that the Chancellor has set. For example, it is unclear whether they will simply result in alternative forms of tax avoidance and more ownership of properties and dwellings being moved offshore, which will simply shift the problem, or whether they will tackle what is to many people an injustice in the tax system that needs to be clamped down on.

That takes me to amendment 15. Clause 91 sets out the charge on properties worth more than £2 million held in corporate envelopes. Labour said clearly that we would now use such a tax to raise £2 billion to fund the reintroduction of the 10p tax rate, to ensure that those who have been hardest hit by the current economic stagnation would be given support through the tax system. We think that that is a fair way to raise money on properties worth more than £2 million.