I beg to move amendment 60, in clause 192, page 113, line 26, after ‘rights)’ insert—

‘(a) has effect subject to the amendment in subsection (1A) in relation to agreements for the grant or assignment of an option that are entered into during the period beginning with 21 March 2012 and ending immediately before the day on which this Act is passed, and’.

With this it will be convenient to discuss the following:

Government amendments 61 to 64.

Clause stand part.

Clause 192 amends the stamp duty land tax rules on the transfer of rights to put beyond doubt the fact that particular stamp duty land tax avoidance schemes do not work. These avoidance schemes are the latest in a number of schemes that attempt to avoid stamp duty land tax on the purchase of property. In the 2012 Budget, the Chancellor made it clear that he expected people to pay stamp duty land tax when they purchased property, and warned that he would not hesitate to use retrospective legislation to close down future schemes. These changes will therefore apply retrospectively from 21 March 2012.

I will provide some background to the clause. Stamp duty land tax contains provisions for a transfer of rights. This is when someone enters into a contract to purchase land but then, before completing the purchase, agrees either to transfer their rights under that contract to a third party or to sell the land on to a third party. These provisions currently result in only one charge to stamp duty land tax, which is on the ultimate purchaser, and the transaction involving the original purchaser is disregarded. The single charge reflects the economic reality of the transaction as the original purchaser never takes possession of the land.

The transfer of rights rules have frequently featured in stamp duty land tax avoidance schemes and legislation was introduced in the Finance Acts 2011 and 2012 to close down two particular schemes. In the 2012 Budget, the Chancellor also announced a review of the transfer of rights rules to make them robust against attempted avoidance, and warned that he would not hesitate to use retrospective legislation to close down future stamp duty land tax avoidance schemes.

My hon. Friend knows that on Thursday I will be dealing with some retrospection issues in my proposed new clause 1. Will he explain his thinking on why retrospection specifically is applicable and necessary in this circumstance?

We believe that there are circumstances where the Government must be able to take effective action to stop the aggressive marketing of tax avoidance schemes. That is only fair to the vast majority of taxpayers who comply with the letter and the spirit of the law. However, we have made it clear that retrospection should be wholly exceptional, but that when particular circumstances arise and it is necessary to take firm action we are prepared to do so.

In those circumstances, we have something that is clearly contrary to Parliament’s intention. The Chancellor has given a clear warning that we are prepared to use retrospective legislation in that area, and I believe that our response, in the circumstances, is wholly proportionate. Anyone who participated in the arrangements and was advised on them should be aware that the arrangements were clearly contrary to Parliament’s intention. For the vast majority of people who pay stamp duty land tax, where a transaction involves the sale of a property it is absolutely right that we address the behaviour involved, as we do in the clause.

The Chancellor gave a clear warning that the Government would seek to tackle such things. It would be interesting if the Minister set out for the Committee whether, if another such scheme is used under different rules or the replacement rules, the Government will consider bringing in a retrospective rule to stop that or rely on the anti-tax abuse rule that will come into force on Royal Assent as as effective a block as is needed in those situations?

As I said a moment ago, in Budget 2012 the Chancellor made it clear that he was prepared to use retrospective legislation to close down future stamp duty land tax avoidance schemes, and that warning remains. I do not want there to be any confusion about that. The statement still stands. The behaviour that we address in the clause falls clearly within the scope of my right hon. Friend the Chancellor’s warning in 2012.

Despite that warning, there has been an increase in the use of two schemes in particular. They are schemes that seek to delay the completion of the transfer of rights contract for a number of years, leaving the original purchaser in possession of the property without their having paid any stamp duty land tax. Although Her Majesty’s Revenue and Customs does not believe that the schemes produce the result claimed by their promoters, the schemes have continued to be marketed and used. It was appropriate, therefore, to act on the Chancellor’s warning last year and to introduce retrospective legislation to close the schemes down, and we might be prepared to do the same in the future if faced with similar circumstances. My hon. Friend the Member for Amber Valley is right that the general anti-abuse rule might be helpful in addressing the matter, but we have made it clear that that does not mean that we will refrain from taking other actions to deal with aggressive avoidance. The changes made by the clause will ensure that stamp duty land tax is paid by the true purchaser of the land, which in these schemes is the original purchaser.

I turn now to Government amendments 60 to 64. The clause makes it clear that two particular avoidance schemes that abuse the SDLT transfer of rights rules are ineffective. Since the announcement at Budget 2013 that legislation would be introduced to put it beyond doubt that the two schemes did not work, HMRC has identified a third scheme that abuses the transfer of rights rules.

That scheme has been used since the Chancellor’s announcement last year, and the Government amendments therefore address that matter. The scheme is a variation on the one, closed down at Budget 2012, that involved the original purchaser granting an option to a third  party, entitling them to purchase the land at a future date. All the later scheme does is to insert a further step into the original arrangements, which it is claimed gets around the 2012 fix. It is obvious that the promoters and users of the scheme took no heed of the Chancellor’s warning, and it is only fair that action is taken now to prevent them from benefiting from the scheme. The Government amendments therefore include that scheme in the legislation, and the provision will be applied retrospectively from 21 March 2012.

The Minister has addressed the majority of the points I would have put to him, save for one clarification. It might be helpful for him to clarify that at this stage.

The protocol on unscheduled announcements of changes in tax law set out three very particular sets of circumstances where a retrospective application and change to the tax law should be made, one being a significant risk to the Exchequer. However, the Government’s technical note does not make it clear what those risks are and what the assessment of them is. Therefore, it is not entirely clear whether the protocol applies in this case. That echoes the concerns raised by the hon. Member for Wycombe. If HMRC does not believe that the schemes produce the tax result claimed, will the Minister confirm that there is without doubt a significant risk to the Exchequer in this case?

I am grateful for that question. If there is an opportunity to deal with all the hon. Lady’s questions in my opening speech, that might help us to progress. Our argument is that this measure is consistent with the Government’s protocol on unscheduled announcements of changes to law, including the use of retrospective legislation. It falls within the class of being a wholly exceptional case. The reason is that there is a history of abuse in this area of the legislation. Indeed, we have already made that clear. The policy intent has been made clear. The Chancellor gave a clear warning at Budget 2012 that he would not hesitate to use retrospective legislation if abuse of the SDLT rules continued.

It is also worth pointing out that HMRC believes that the particular schemes do not work, so ultimately HMRC would win in litigation; but that would take a considerable length of time. In those circumstances, it would be better to address the matter now by making the situation clear and putting it beyond doubt. As far as the tax at risk from the transfer of rights schemes is concerned, HMRC estimates that it is around £160 million over the next five years. Even though HMRC is confident that it would win any case, that is not an insignificant amount. It is an area where there has been repeated abuse and there have been repeated warnings that the Government will not tolerate that behaviour. In those circumstances, we believe that action in the case is justified, including retrospective action.

As I have made clear many times before and I suspect will again on Thursday, retrospective legislation should be used with great care. I believe we have acted with great care in these circumstances.

I did not wish to interrupt my hon. Friend in mid-flow, but I would like to take him back to where he said the schemes do not work. Will he be  clear? Does he mean that they are unlawful, or that they are lawful but HMRC does not approve of them because they are clearly not in line with Parliament’s intent? Are they lawful or not?

The word “lawful” can lead to a degree of ambiguity. When people say it is not lawful, is it criminal? There is no criminal offence that one can see here. Is it effective under the law that currently stands for the taxpayer not to over-tax? Does it do what the promoter claims? Does it work in so far as the individual does not have to pay stamp duty land tax? The view of HMRC is that it is not effective; it does not do that. But clearly, if we can pass this legislation it avoids all questions of doubt and clarifies the position. We can deal with a form of avoidance that has rightly caused considerable public disquiet. It is not fair that, when the vast majority of our constituents pay stamp duty land tax when they acquire a property, there are some individuals—I was going to say that they are well advised, but they are least advised—who attempt to get round the rules. That is not right, so I commend the clause and my amendments to the Committee.

Amendment 60 agreed to.

Amendments made: 61, in clause 192, page 113, line 28, leave out from ‘into’ to end of line 29 and insert ‘during that period’.

Amendment 62, in clause 192, page 113, line 29, at end insert—

‘(1A) At the end of subsection (1A) insert “or an agreement for the future grant or assignment of an option”.’.

Amendment 63, in clause 192, page 114, line 30, at end insert—

‘(6A) Subsections (8) to (10) apply where—

(a) as a result of subsection (1A) of this section, section 45 of FA 2003 does not apply in relation to a contract of the kind mentioned in subsection (1)(a) of that section (“the original contract”),

(b) the original contract was substantially performed or completed (or, in a case that would have fallen within subsection (5) of that section, substantially performed or completed so far as relating to the relevant part of the subject-matter of the original contract) at the same time as, and in connection with, the substantial performance or completion of an agreement for the grant or assignment of an option, and

(c) that time fell before the day on which this Act is passed.’.

Amendment 64, in clause 192, page 114, line 31, leave out from beginning to ‘apply’ and insert ‘Subsections (8) to (10) also’.—(Mr Gauke.)

Clause 192, as amended, ordered to stand part of the Bill.