Clause 199 - Contracts that are not taxable

Finance Bill – in a Public Bill Committee am 3:30 pm ar 18 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

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

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

As is the case with several other clauses, clause 199 results from the introduction of the personal independence payment and the armed forces independence payment from April 2013 as a replacement for the disability living allowance.

Committee members may be aware that the insurance premium tax is a tax on general insurance premiums that is payable by anyone receiving taxable insurance premiums as an insurer, or indeed anyone intending to receive such premiums. However, insurers do not have to charge insurance premium tax on contracts of insurance in relation to motor vehicles that, subject to various conditions being satisfied, are used by or intended for use by a “handicapped person”—the words in the explanatory notes seem to be extremely insensitive—who is in receipt of a specified benefit. I hope that the Minister takes note of the language used in the explanatory notes.

Although the tax information and impact note suggested that the measure would be dealt with via secondary legislation, clause 199 amends paragraph 3 of schedule 7A  to the Finance Act 1994 to extend the list of specified benefits to include the new personal independence payment and the armed forces independence payment. The tax information and impact note states that the changes in the Bill are being made

“so that new and continuing recipients of these benefits and claimants of the tax reliefs and supports are both eligible for the same reliefs and supports”.

However, we also know from the note that

“it is expected that as part of the overall changes to the welfare system, approximately 500,000 disabled individuals”— that is better terminology—

“will no longer receive either DLA or PIP”.

Does the Minister know how many of the 500,000 people who are expected to be taken off disability allowances have motor vehicle insurance that is currently outside insurance premium tax? What impact will the measure have on the cost of motor vehicle insurance for those 500,000 people, or a proportion thereof, who are expected no longer to receive either DLA or PIP, and who will therefore suffer a detrimental impact?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

Clause 199 makes changes to insurance premium tax legislation. It adds references to two new benefits that are being introduced as part of the welfare reforms to ensure that people who are eligible to claim either of those benefits can continue to benefit from an existing IPT relief from 8 April 2013.

The Department for Work and Pensions is reforming the welfare benefits system by bringing in the new universal credit system. As part of its reforms, the Department is partially replacing the current disability living allowance with the new personal independence payment benefit. The Ministry of Defence is introducing the new armed forces independence payment benefit for armed forces personnel who have been injured in action since 2006. The new AFIP benefit begins on 8 April 2013, while the PIP will gradually be phased in over a number of years, with people becoming eligible from 8 April 2013.

Existing legislation allows an IPT relief on insurance premiums covering motor vehicles leased by qualifying disabled persons. That legislation needs to be amended to include references to the new benefits so that all eligible people can begin or continue to claim the IPT relief. The changes made by clause 199 mean that the IPT relief can continue to be claimed by eligible persons.

Photo of Andy McDonald Andy McDonald Llafur, Middlesbrough

My hon. Friend the Member for Newcastle upon Tyne North talked about the terminology in the Bill. I am a little surprised to see the words “handicapped persons”; I thought we had moved on from that. Will the Minister undertake to review the terminology to determine whether the provision can be put into more acceptable language?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

If the hon. Gentleman bears with me, I usually come to questions towards the end of my contribution. He is right to raise that point, and I will address it in a moment.

The changes made by clause 199 will mean that the IPT relief can continue to be claimed by eligible persons. The measure is expected to have a negligible impact on the Exchequer and will not have any significant economic impact.

The hon. Member for Newcastle upon Tyne North asked about the use of the word “handicapped” in the explanatory notes. I share her concerns; I noticed that word the first time I read the notes. However, that particular word has always been used in IPT legislation, for example in paragraph 3 of schedule 7A to the Finance Act 1994. We have moved away from using such language, and, as the hon. Lady rightly said, “disabled person” would be much more appropriate. I will take that issue away and see whether we can do anything about it. Even though the term is in historical legislation, we should concern ourselves about something that is so important. I therefore respect the point raised by the hon. Lady and the hon. Member for Middlesbrough.

Sitting suspended for a Division in the House.

On resuming—

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I was about to come to an end. I had to deal with one final question from the hon. Member for Newcastle upon Tyne North. Of the 500,000 likely to lose out, how many have been taken out? The intention of the measure is to ensure that those entitled to claim PIP and AFIP can retain access to IPT relief. Any reduced entitlement is a consequence of the DWP reforms, which mean that fewer people are qualified for PIP than for DLA at present. We do not have the numbers for IPT specifically, but by 2018 under PIP, 230,000 people will receive the same or higher award, with 150,000 receiving more money than under the DLA system.

Question put and agreed to.

Clause 199 accordingly ordered to stand part of the Bill.