James Murray MP: speeches

Speeches

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the shadow Minister for his comments. I was going to thank him for his support for these measures, but I do not know whether he explicitly said that. I think he nearly did, so I will take it as support unless he jumps in to correct me. One of the key measures that the shadow Minister highlighted in our package of legislative measures that is the subject of clause 37 is the temporary repatriation facility, an important feature of the system we are seeking to introduce. What it does—I say this so that all Members are aware—is to introduce a reduced tax rate for remittances to encourage individuals to bring their capital to the UK and to spend and invest it here. The fact that it will raise considerable revenue is beneficial to the public finances, but it is also critical to recognise that that is a consequence of people bringing money into the UK to spend and invest here, which is something I am sure the Opposition side of the Committee will welcome as well.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  The shadow Minister alleges that there is some discrepancy on this side of the Committee; I feel like there is some discrepancy within his own views. I return to the central point that he seemed to begin by saying that he welcomed our measures—that he supports them and understands why tough decisions have to be taken—but then seemed to explain why he did not support them. The shadow Minister asked why we decided to extend the threshold freeze for inheritance tax while not, for instance, increasing income tax rates; that is a political choice. It is a difficult choice, but it is a political choice. As a Government we have made the choice to make sure that we do not raise income tax. We went into the election saying that we would not raise taxes on working people, and we have kept that pledge through our policies on income tax, employee national insurance and the rate of VAT. We made those commitments and we are honouring them.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I reassure the shadow Minister that, as Ministers and Treasury officials, we are routinely in conversation with the industry and those companies that benefit from R&D support. We will ensure that all changes to legislation and all opportunities available for us to support the industry are communicated with clarity, and we will ensure that everyone is aware of what support we can offer for their economic growth ambitions. Question put and agreed to. Clause 30 accordingly ordered to stand part of the Bill. Clause 31 Employee-ownership trusts Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  Clause 26 makes changes to maximise the potential of the UK’s world-class visual effects industry, and clauses 27 and 28 make changes to ensure continuity for companies claiming expenditure credits for film, TV and video game production, by aligning the legislation with equivalent provisions in the previous tax reliefs. The UK is a strong performer in visual effects production and is home to several Oscar-winning companies, but in recent years there have been reports of visual effects activity moving overseas. Stakeholders report that that is because of the 80% cap on qualifying expenditure relating to the audiovisual expenditure credit, or AVEC. Currently, companies can receive AVEC on up to 80% of their production costs, including visual effects costs. Visual effects work is done virtually, so companies may place 80% of their production costs in the UK and place their visual effects costs overseas, particularly in countries such as Canada and France, which offer special tax incentives for visual effects. In November 2023, a call for evidence on the visual effects industry was published. It provided substantial evidence that visual effects work was moving overseas because of the 80% cap and because of increased competition from countries that offer targeted visual effects tax incentives. Separately, previous tax reliefs for film, TV and video game production are being phased out and will be fully replaced with expenditure credits from 1 April 2027. Indeed, companies can already claim expenditure credits instead of the tax reliefs if they wish. The changes made by clause 26 will increase the amount of AVEC awarded to UK visual effects costs in film and high-end TV production by 5 percentage points, to a total credit rate of 39%. The changes remove AVEC’s 80% cap on qualifying expenditure for visual effects costs, so that all those costs, including those that are above the 80% cap, may receive the enhanced 39% rate of relief. Around 1,300 companies claim film or high-end TV tax relief and stand to benefit from the changes, and the additional tax relief is expected to cost £75 million per year from 2028-29. Clause 27 sets out that the previous tax reliefs and the new expenditure credits both require companies to provide cultural certificates from the British Film Institute to support their claims for relief. HMRC requires the certificates to be in force at the time a claim is made. The new expenditure credits legislation is less clear on that requirement than the previous tax reliefs legislation; it requires certificates to have effect at the end of each claim period, rather than only at the time the claim is made. The changes made by clause 27 will therefore align the expenditure credits legislation with the tax reliefs legislation, to clarify that cultural certificates must be valid when claims are made, and ensure continuity of treatment between the previous tax reliefs and the new expenditure credits. On clause 28, the previous tax reliefs and the new expenditure credits both have rules on the treatment of expenses that are not made within four months of the end of the accounting period in which they are incurred. The tax relief rules allow for such expenses to be deducted from profits, but do not allow additional relief on them until they are paid. The expenditure credit rules prevent the expenses from being deducted from profits at all—that is, until they are paid. The changes made by clause 28 will align the expenditure credit rules with the tax relief rules, so that the unpaid amounts can be deducted from profits that are still ineligible for relief until they are paid. This will ensure continuity for companies that are used to the treatment of unpaid amounts under the previous tax reliefs. In conclusion, the changes to the audiovisual expenditure credit will boost the UK’s offer in visual effects in an increasingly competitive international environment, and incentivise more visual effects work on UK productions to be done here in the UK. Furthermore, the changes to the expenditure credits legislation will align it with the more familiar tax relief provisions, ensuring continuity for film, TV and video game companies. I commend the clauses to the Committee.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the shadow Minister for his support for these clauses, and for what we seek to do through them: as he said, level the playing field between alternative finance and conventional finance. He asked whether the changes can be applied retrospectively. As he is aware, the Government do not generally apply tax changes retrospectively. The changes to alternative finance tax rules announced in the autumn Budget will apply from 30 October last year. The Government appreciate that some alternative finance customers will have already paid capital gains tax on refinancing arrangements, which is where this question arises from. However, to provide taxpayers with certainty over their tax position and to ensure that the law is applied in the way intended, the Government do not generally apply tax changes retrospectively and will not be doing so in this case. More broadly, the shadow Minister asked whether we will be taking measures to ensure there is no fraud. It should go without saying that, as with any measures the Government take, we will ensure there is no fraud. That does not apply any more or less to this measure than it would to any other; we want to make sure there is no fraud in the way that any tax measures we take are used. That will be on our radar, as it would be with any other tax changes that we make. In terms of the number of people affected, I know that the previous Government’s consultation on the alternative financing tax rules published in January last year, which closed in April, received 22 responses, including from alternative finance providers, representative groups, tax and legal professionals, academics, and consumers. This is, of course, a sector that we want to grow. It is one of the many sectors of the UK economy that will drive economic growth. Question put and agreed to. Clause 35 accordingly ordered to stand part of the Bill. Schedule 7 agreed to. Clause 36 Statutory neonatal care pay Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  At the risk of repeating myself, amendments are routinely brought forward in Committee and on Report, and they are scrutinised at both stages of the Bill. The intention is to make sure that the legislation is in the best possible place by the time it gets to Third Reading and receives Royal Assent. The focus for us is to make sure that this legislation works as well as possible. We are pragmatic about that; we want to make sure that it functions effectively. That is why we are making technical changes by way of Government amendments today, and why there will be further amendments on Report to make the system simpler and more generous, in the way that the Chancellor has set out. This is about achieving a system that makes the tax system both fairer, in the ways that we have set out, and as simple and attractive as possible for people who want to come to the UK and bring their money to the UK, to invest and spend it here, which will help us to grow the economy. Question put and agreed to. Clause 40 accordingly ordered to stand part of the Bill. Schedule 9 Income Tax and Capital Gains Tax: Remittance Basis and Domicile Amendments made: 55, in schedule 9, page 208, line 24, leave out “sections 56(5)(a), 61G(5)(a) and 61R(5)(a)” and insert “sections 56, 61G and 61R” This amendment together with Amendment 56 omits subsections that have become redundant in light of the ending of the relevance of domicile to income tax . Amendment 56, in schedule 9, page 208, line 25, leave out from “payment)” to end of line 27 and insert “, omit subsections (4) and (5).” This amendment together with Amendment 55 omits subsections that have become redundant in light of the ending of the relevance of domicile to income tax . Amendment 57, in schedule 9, page 210, line 34, at end insert— “Premium trust funds 21A In section 174 of FA 1993 (premium trust funds), omit subsection (6)(a). FOTRA securities 21B (1) In section 22 of F(No.2)A 1931 (Treasury power to issue securities with a FOTRA condition)— (a) in subsection (1)(b), for “persons who are neither domiciled nor resident in the United Kingdom” substitute “exempt persons”; (b) after subsection (1) insert— “(1A) For the purposes of subsection (1), the following persons are “exempt persons”— (a) individuals who are not resident in the United Kingdom, and (b) persons who are not individuals and are neither domiciled nor resident in the United Kingdom.” (2) In section 154 of FA 1996 (FOTRA securities), in subsection (1)— (a) after “applies,” insert “where the person with the beneficial ownership of the securities is not an individual and”; (b) for “the person with beneficial ownership of the securities” substitute “that person”. (3) Any security issued before 29th April 1996 with a FOTRA condition shall be treated in relation to times on or after 6 April 2025 as if— (a) it were a security issued with the post-1996 FOTRA conditions (and with no other FOTRA condition), and (b) the post-1996 FOTRA conditions had been authorised in relation to the issue of that security by virtue of section 22 of F(No.2)A 1931. (4) In sub-paragraph (3) — “a FOTRA condition” means a condition about exemption from taxation authorised by section 22 of F(No.2)A 1931; “the post-1996 FOTRA conditions” means the conditions about exemption from taxation with which 7.25% Treasury Stock 2007 was first issued by virtue of section 22 of F(No.2)A 1931.” Amendment 58, in schedule 9, page 210, line 34, at end insert— “Reliefs in respect of income from investments etc. of certain pension schemes 21C In section 614 of the Income and Corporation Taxes Act 1988 (exemptions and reliefs in respect of income from investments etc. of certain pension schemes), in subsections (4) and (5), omit “not domiciled and”.”— (James Murray.) This amendment removes references to domicile in provisions of the Income and Corporation Taxes Act 1988 relating to relief on income from investments of certain pension schemes. Schedule 9, as amended, agreed to. Clause 41 ordered to stand part of the Bill. Schedule 10 Temporary repatriation facility Amendment made: 59, in schedule 10, page 214, line 6, leave out paragraph (a) and insert— “(a) Part 2 of this Schedule (exemptions etc for designated qualifying overseas capital),”— (James Murray.) This amendment corrects an incorrect reference. Schedule 10, as amended, agreed to. Clause 42 ordered to stand part of the Bill. Schedule 11 agreed to. Clause 43 Trusts: connected amendments, transitional provision etc Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the hon. Gentleman for his support on this matter. He asked about the receipts from ATED. The most recent figures are from 2022-23 and show £124 million of receipts from ATED overall. I hope that puts in context the small, £5 million impact of the changes that these clauses and clause 35 would introduce. The hon. Gentleman also asked how many people are impacted by these changes. We recognise that they will benefit a small number of finance providers and individuals, and anticipate that the number of people who will benefit will be low. However, it is important to give this sector the confidence to grow and to ensure a level playing field. The shadow Minister agreed that it is important to ensure that the Islamic or alternative finance sector has that level playing field, so that it can contribute towards our country’s economic growth. These clauses, along with clause 35, seek to achieve that goal. Question put and agreed to. Clause 54 accordingly ordered to stand part of the Bill. Clause 55 ordered to stand part of the Bill. Clause 56 Testing of FMI technologies or practices Q uestion proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  The clause and schedule make changes to alternative finance tax rules for refinancing, and will promote financial inclusion for those who choose to use alternative forms of finance, for either religious or other reasons. Alternative finance is a method of raising finance that characteristically involves the sale, purchase and renting of assets in circumstances in which conventional financing would involve lending at interest. Currently, a capital gains tax or, in some cases, corporate tax or income tax liability can arise when entering into alternative refinancing arrangements; this would not occur if conventional financing arrangements had been used. This issue mostly affects properties that do not qualify for capital gains tax private residence relief, such as rental properties, second homes and commercial properties. The changes made by clause 35 and schedule 7 will ensure that, where qualifying alternative finance provisions are used, individuals and companies will not be liable to capital gains tax, corporation tax or income tax on the transfer of part of the beneficial interest in the asset to a financing institution in order to raise finance. The Government are committed to the continued strength of the UK Islamic finance sector and to it providing access to alternative finance to anyone who seeks it. These measures deliver on this commitment by putting alternative and conventional financing on a level playing field in relation to their tax treatment when refinancing. As a result, those who choose to use alternative finance will receive broadly the same tax treatment as those using conventional financing arrangements. I therefore commend clause 35 and schedule 7 to the Committee.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the hon. Gentleman for his further comments. To address his point regarding the OBR, we seek to strengthen that institution, inspired not least by some of his colleagues’ views of the OBR having damaged trust in it under the previous Government. We wanted to make sure that that could never happen again, by strengthening its standing in law. As the hon. Gentleman will know, when the OBR is looking at suggested tax changes, particularly when they are more complex than simply changing a rate—when they are more involved—it is a matter of course for degrees of uncertainty to be associated with that revenue from different measures. The point about the design of the scheme is best answered by explaining that this is about striking the right balance. The hon. Gentleman asked whether the reporting requirements are too onerous. It is a balance between making sure that we minimise the burden on individuals, and of course the businesses that they work for—we want to make sure that we are not putting any onerous requirements on them to report information that is not needed—while, at the same time, making sure that we have the information to be able to evaluate the regime, to identify any avoidance risks and to ensure compliance. It is a constant tension within the tax system to make sure that burdens are as low as possible while ensuring that we have adequate information to prevent non-compliance and so on. Those are the judgments that we have to take as Ministers, but we want to take them in the way that achieves the best possible outcome. To conclude, the overall package that we are proposing, with the foreign income and gains regime, where foreign income and gains will see no income tax for four years, is more generous—is more attractive—than the remittance basis that is currently in place, because it means that those foreign incomes and gains will not be subject to income tax. Therefore, I hope that our proposed package is not only positive for public finances here in the UK, but serves as an attractive regime for people around the world with talent and with entrepreneurial spirit, who want to work and invest in our country and help our economy grow, and that they can see that the scheme will help them to do just that. I commend these measures to the Committee. Amendment 20 agreed to. Clause 37, as amended, agreed to. Clause 38 ordered to stand part of the Bill. Schedule 8 Relief on foreign employment income: consequential and transitional provision Amendments made: 44, in schedule 8, page 194, line 33, leave out “qualifying” and insert “non-resident or qualifying”. This amendment is to make parenthetical description of sections 373 and 374 of ITEPA 2003 consistent with those sections as amended by Schedule 8. Amendment 45, in schedule 8, page 194, line 39, after “Part 2” insert— “of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act)”. This amendment provides that an employee must not be a qualifying new resident for the purposes of Chapter 5 of Part 8 of ITTOIA 2005 to benefit from a deduction under section 341 of ITEPA 2003, as well as not being a qualifying new resident for the purposes of ITEPA 2003. Amendment 46, in schedule 8, page 195, line 4, after “Part 2” insert— “of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act)”. This amendment provides that an employee must not be a qualifying new resident for the purposes of Chapter 5 of Part 8 of ITTOIA 2005 to benefit from a deduction under section 342 of ITEPA 2003, as well as not being a qualifying new resident for the purposes of ITEPA 2003. Amendment 47, in schedule 8, page 195, line 11, after “Part 2” insert— “of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act)”. This amendment provides that an employee can benefit from deductions under section 355 of ITEPA 2003 where the employee is a qualifying new resident for the purposes of Chapter 5 of Part 8 of ITTOIA 2005, as well as where the employee is a qualifying new resident for the purposes of ITEPA 2003. Amendment 48, in schedule 8, page 195, line 13, leave out “qualifying” and insert “non-resident or qualifying”. This amendment is to make the parenthetical description of section 373 of ITEPA 2003 consistent with that section as amended by Schedule 8. Amendment 49, in schedule 8, page 195, line 36, after “Part 2” insert— “of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act)”. This amendment provides that an employee can benefit from deductions under section 373 of ITEPA 2003 where the employee is a qualifying new resident for the purposes of Chapter 5 of Part 8 of ITTOIA 2005, as well as where the employee is a qualifying new resident for the purposes of ITEPA 2003. Amendment 50, in schedule 8, page 196, line 7, after “Part 2” insert— “of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act)”. This amendment provides that an employee can benefit from deductions under section 374 of ITEPA 2003 where the employee is a qualifying new resident for the purposes of Chapter 5 of Part 8 of ITTOIA 2005, as well as where the employee is a qualifying new resident for the purposes of ITEPA 2003. Amendment 51, in schedule 8, page 196, leave out line 16. This amendment reinstates section 375 of ITEPA 2003 which defines “qualifying arrival date” for the purposes of sections 373 and 374 of ITEPA 2003. Amendment 52, in schedule 8, page 196, line 21, after “Part 2” insert— “of this Act or Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act)”. This amendment provides that an employee must not be a qualifying new resident for the purposes of Chapter 5 of Part 8 of ITTOIA 2005 to benefit from a deduction under section 376 of ITEPA 2003, as well as not being a qualifying new resident for the purposes of ITEPA 2003. Amendment 53, in schedule 8, page 197, line 17, at end insert— “2A In Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004), in paragraph 5 (travel costs and expenses where duties performed in the United Kingdom) — (a) in the heading, for ‘non-domiciled’ substitute ‘non-resident or qualifying new resident’; (b) in paragraph (a), for ‘non-domiciled’ substitute ‘non-resident or qualifying new resident’.” This amendment makes the parenthetical descriptions of sections 373 and 374 of ITEPA 2003 contained in the Social Security (Contributions) Regulations 2001 consistent with those sections as amended by Schedule 8. Amendment 54, in schedule 8, page 198, line 32, leave out “public notice given” and insert “general direction made”.— (James Murray.) This amendment means that the requirements of notices under new section 690D will be specified in a general direction made by HMRC rather than a public notice. Schedule 8, as amended, agreed to. Clause 39 ordered to stand part of the Bill. Clause 40 Remittance basis not available after tax year 2024-25 Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the shadow Minister for his comments and for setting out some important context around the tax reliefs and expenditure credits, and around why they are so important in supporting growth in the UK economy. On his question about the independent film tax credit, as he I am sure understands, films that claim the independent film tax credit will receive a 53% rate of audiovisual expenditure credit on up to 80% of production costs. That includes visual effects cost. The independent film tax credit therefore provides generous support for visual effects costs within independent films. Separating the additional tax relief for visual effects from the independent film tax credit helps to ensure that both schemes are simple and easy for companies to understand. On the publication that the shadow Minister says happened in the last few hours, that is so hot off the press that I am not even authorised to speak about it yet. I have not been briefed on it because I have been getting ready for this Committee. I am sure that if it has been submitted, the right officials and Ministers will look at it as soon as possible. Question put and agreed to. Clause 26 accordingly ordered to stand part of the Bill. Clauses 27 and 28 ordered to stand part of the Bill . Clause 29 Research and development relief: Northern Ireland companies Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  Clauses 44 to 46 and schedule 13 make changes to replace the current domicile-based system of inheritance tax with the new residence-based system. Currently, an individual’s domicile status determines whether their non-UK assets are in scope of inheritance tax. The non-domiciled individual’s personal non-UK assets are not in scope until they become deemed domiciled. However, if such assets are placed into a trust they will remain out of scope in perpetuity, even if an individual later settles in the UK.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I beg to move amendment 20, in clause 37, page 31, line 21, at end insert— “12A So much of any amount of income treated as arising to an individual under section 633 (capital sums paid to settlor by trustees of settlement) for the tax year as falls within the foreign amount of income available up to the end of the tax year. The foreign amount of income available up to the end of a tax year is the amount that would be determined, in accordance with sections 635 to 637 (amount of available income), as the amount of income available up to the end of the tax year if all income arising under the settlement from a source in the United Kingdom were ignored.” This amendment provides for income treated as arising to a settlor of a trust as a result of a capital payment made by the trustees to be eligible for relief to the extent that the deemed income arises from foreign income.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I am always happy to respond to queries from the Chartered Institute of Taxation—they were eloquently presented by the shadow Minister—and will I make sure that any responses to those queries are forthcoming. However, I think the central point, which the shadow Minister focused on in his comments, is about the temporary repatriation facility and our changes to that. The Chancellor was very clear that these changes, which she mentioned at Davos, are designed to make the system simpler and more attractive. As he will know, Finance Bills are routinely amended both in Committee and on Report by the Government to ensure that the best possible legislation is in place before a Finance Bill gains Royal Assent. The new temporary repatriation facility, which we are setting up under these clauses, includes rules concerning how income and gains in a trust structure are matched to beneficiaries. These are complex things and the amendments will simplify that process. To provide absolute clarity, the amendments to the temporary repatriation facility, which the Chancellor referred to, are separate from the amendments that we are debating today in Committee, which clarify specific aspects of the legislation and ensure that the policy works as intended. Collectively, the Government amendments before the Committee ensure that the legislation works as intended, and the amendments the Chancellor mentioned at Davos are designed to make the system simpler and more attractive. If it is a win-win, where it does not have an impact on the income—

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I will attempt to link that question to inheritance tax thresholds. I am thinking rapidly on my feet and struggling somewhat. With your permission, Mr Mundell, I will respond briefly to the hon. Gentleman’s point about the difficult decision—one of the toughest we took in the Budget—to increase employer national insurance contributions. We did not want to have to take that decision, but we had to take a series of difficult decisions because of the state of the public finances. We recognise that it was difficult for businesses as well. What is critical for businesses, and for the economy more widely, is having the public finances in balance, meeting our fiscal rules and ensuring that we have stability in the economy. As I said earlier, without that, the investment in growth that we are determined to pursue will not have the right foundations. I will return to inheritance tax thresholds. I set out the number of estates that will be affected as a result of the thresholds. I do not know whether the shadow Minister is aware of the data that has been put out on the changes to agricultural property relief and business property relief. The number of estates affected that claim agricultural property relief, and agricultural property relief with business property relief, is estimated to be up to 530 in ’26-27. I have referred to that information in the Chamber several times, and it was in the letter that the Chancellor sent to the Treasury Select Committee. To conclude, although the shadow Minister’s position is confusing, I welcome the Opposition’s support for the measures. Ordered, That the debate be now adjourned. —(Christian Wakeford.)

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  Clause 29 makes small changes to the rules for enhanced support for research and development-intensive companies with a registered office in Northern Ireland. At the spring budget 2023, the previous Government announced an enhanced rate of relief within the R&D small and medium-sized enterprise scheme applying from 1 April 2023. Separately, from April 2024 slightly different rules applied for R&D-intensive companies with a registered office in Northern Ireland, allowing them to continue claiming relief on a wider range of overseas expenditure than companies in Great Britain, while introducing a cap on the amount of relief that can be claimed. Clause 29 amends the rules introduced last April to reflect the particular market conditions in Northern Ireland and ensure consistency with the UK’s international obligations. This will introduce some additional requirements around the cumulation of aid and reporting, which will apply to claims made on or after 30 October 2024 by eligible companies with a registered office in Northern Ireland. A very small number of claimant companies in Northern Ireland are expected to be affected, while the vast majority will continue to be better off compared with their counterparts in Great Britain. This is because their claims are too small to be affected by the cap, but they will still be able to claim on overseas expenditure, as before. The Office for Budget Responsibility has certified this measure as having a negligible impact on the cost of the relief. The Government are committed to supporting R&D investment across the UK through the R&D tax reliefs, which play a key role in supporting the mission to kick-start economic growth. The changes will ensure that the R&D reliefs reflect the particular market conditions in Northern Ireland and ensure consistency with the UK’s international obligations. I commend the clause to the Committee.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  The clause makes changes to the inheritance tax thresholds so that they continue at the current levels in 2028-29 and 2029-30. Subject to reliefs and exemptions, inheritance tax is payable if the net value of an estate exceeds the respective thresholds for two bands: the nil-rate band, for which the threshold has been £325,000 since 2009-10, and the residence nil-rate band, for which the threshold has been £175,000 since 2021. Those thresholds rise with the consumer price index each year, but have in recent years been frozen until April 2028, by the previous Government. The changes made by clause 57 will fix the threshold at current levels for a further two years, until April 2030. This will raise £355 million in 2029-30.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  The clause makes a consequential amendment to the shared incentive plan—SIP—to take account of the introduction of statutory neonatal care pay in the Neonatal Care (Leave and Pay) Act 2023. SIP is a tax advantage share scheme through which a company can award free shares to employees, or enable them to purchase partnership shares through salary deductions authorised by the employee. The SIP legislation requires an employer, when entering a partnership share agreement, to provide notice to inform the employee of the possible effect of salary deductions on their entitlement to social security benefits, such as statutory sick pay or statutory maternity pay. The Neonatal Care (Leave and Pay) Act 2023 introduced provisions to enable parents whose babies require specialist care after birth to take additional paid time off work. The share incentive plan legislation must therefore be updated accordingly to reflect the introduction of statutory neonatal care pay, which may also be impacted by salary deductions. As a result of the changes made by clause 36, statutory neonatal care pay will be included in the notice that employers must provide to employees when entering partnership share agreements alongside other existing statutory payments. The clause will ensure that employees understand the potential impact of salary deductions as part of a SIP agreement on their entitlement to statutory neonatal care pay. I therefore commend the clause to the Committee.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I start by putting on the record my thanks to the Chartered Institute of Taxation. It was a great support to me in opposition and continues to be an important stakeholder for us in government. I will try to respond to some of the shadow Minister’s points. First, he raised concerns articulated by the Chartered Institute of Taxation about trading and property income boundaries. There are established principles that underline what is trading and what is income from property. The bright-line tests that have been put forward distort those principles rather than clarify them. Whether activity is income from property depends on the nature of the activity undertaken, and specifically how the profit is derived. If the profit is derived from the exploitation of land, the income is taxable as property income. The furnished holiday let rules provided for specific reliefs, but for tax purposes it has always been property income, not trading income. Categorising some property income arbitrarily as trading would give more reliefs than FHLs previously had. The shadow Minister also raised concerns about how the repeal of the FHL rules will apply practically to landlords and how that may affect them. I reassure him that HMRC has already published guidance on the changes and will be publishing more ahead of April, when the changes come into effect. We have also engaged with the industry since the announcements to ensure that we are aware of its reaction. On the shadow Minister’s other points in relation to business asset disposal relief and roll-over relief, we have considered the impacts of the changes on those two reliefs. It will depend on an individual’s personal circumstances, but broadly each person would need to dispose of the whole or part of an FHL business, or dispose of assets that were used for the purposes of an FHL business that has ceased, before April 2025. We have been fair in our approach not to restrict relief where someone has had an FHL before repeal. Individuals should consult online guidance or a tax adviser before making any decisions. The shadow Minister asked about married couples. We have considered the impact of the changes on married couples and civil partners. The removal of the FHL rules will mean that a married couple is subject to the same rules as other landlords. For married couples, income is assumed to be split 50:50 unless a declaration is made to split the income in a different proportion, which must be the same as the proportion of ownership between the couple. If they want to change the proportions, married couples will have to make an election for joint ownership arrangements as per the usual process. There will be a deadline of April for married couples to adjust to the changes as we cannot backdate such elections. That was already set out online following the consultation on the draft legislation. Further online guidance will be available. I hope I have covered most of the shadow Minister’s points. I conclude by recognising my gratitude to him for not opposing the provisions; it would be noteworthy if he had changed his mind since he was in government. I am not sure whether all his colleagues are on exactly the same page as him, but I will not pry at this stage of our consideration of the Bill. Perhaps his slightly caveated response to the clauses reflects some of the discussions happening among Members on the Opposition Front Bench. Notwithstanding whatever is happening behind closed doors, I welcome their support for the clause. Question put and agreed to. Clause 25 accordingly ordered to stand part of the Bill. Schedule 5 agreed to. Clause 26 Films and television programmes: increased relief for visual effects Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the shadow Minister for his remarks. He asked about the consultation and how we developed these policies. It is worth pointing out that there has been quite extensive discussion about the legislation on non-domicile status. The Government published a technical note at the autumn Budget in October 2024 explaining the proposed changes to provide certainty ahead of the rules coming into force in April 2025. Officials have engaged extensively with interested specialists and individuals over the summer and throughout the development of this policy. Many elements, such as the tapered tail and the transitional arrangements, were proposed by representative bodies. Those representative bodies also told us that people want certainty about the proposed new rules as early as possible, which is why we published information ahead of the Finance Bill and discussed it with people who might be affected and have views to add. I will write to the shadow Minister with details on the very specific question he asked, so he has that information for reference. The objective with this policy is to achieve our aim of making the tax system fairer while making the new regime as attractive as possible and internationally competitive to encourage people to come to the UK to invest here, work here, create jobs and wealth, and grow our economy. That is the balance that we seek to strike. We have done that in close consultation and discussion with those affected to get the legislation to the best possible place. Question put and agreed to. Clause 44 accordingly ordered to stand part of the Bill. Clauses 45 and 46 ordered to stand part of the Bill. Schedule 13 Inheritance tax Amendments made: 62, in schedule 13, page 266, line 35, at end insert— “(2A) In subsection (1)— (a) in the definition of “excluded property”, for “6 and 48” substitute “6, 48 and 48ZA”; (b) omit the definition of “formerly domiciled resident”.” This amendment updates the definition of “excluded property” in section 272 of the Inheritance Tax Act 1984 in consequence of the amendments made by clause 45. It also removes the now-redundant definition of “formerly domiciled resident”. Amendment 63, in schedule 13, page 266, line 36, at beginning insert “Also”. This amendment is consequential on Amendment 62. Amendment 64, in schedule 13, page 267, line 25, at end insert— “28A “(1) Schedule A1 (non-excluded overseas property) is amended as follows. (2) In paragraph 1, for “48(3)(a)” substitute “48ZA”. (3) In paragraph 5(2)(a), for “or 48(3)(a), (3A) or (4)” substitute “, section 48(4) or section 48ZA”.” This amendment is consequential on clause 45 (which amends section 48 of the Inheritance Tax Act 1984 and inserts new section 48ZA). Amendment 65, in schedule 13, page 271, line 39, at end insert— “(1A) In construing section 267 of IHTA 1984, so far as saved by sub-paragraph (1), the repeal of the definition of “formerly domiciled resident” by paragraph 28(2A)(b) is also to be disregarded.”— (James Murray.) This amendment clarifies that the definition of “formerly domiciled resident”, which is being removed from the Inheritance Tax Act 1984 by Amendment 62, will still be relevant in construing section 267 (which by virtue of paragraph 48 of Schedule 13 will continue to apply for certain limited purposes). Schedule 13, as amended, agreed to. Clause 54 Alternative finance: land in England, Scotland or Northern Ireland Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I am glad that the hon. Lady was paying good attention to what the Chancellor was saying at Davos. The Government will introduce, as the Chancellor set out, a number of amendments to the Finance Bill on Report, to make the temporary repatriation facility simpler to use and more attractive to those who want to benefit from it, while retaining the structure announced at the Budget. More broadly, the new regime is more attractive than the current approach, because individuals will be able to bring income and gains into the UK without attracting an additional tax charge. That will encourage people to bring funds into the UK and spend and invest them here. That is good for the UK in terms of investment and spending coming into the UK, and in terms of the tax revenue, which we spoke about in relation to the previous set of clauses. I therefore commend clauses 40 to 42, schedules 9 to 11 and Government amendments 55 to 59 to the Committee.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  These clauses and schedules also relate to the non-dom reform, which we just discussing in relation to the previous group of clauses. Clauses 40 to 42 and schedules 9 to 11 make changes to ensure that the remittance basis of taxation will no longer apply from 6 April this year. For previous users of the remittance basis, a temporary repatriation facility will be introduced, which we just discussed under the previous group of clauses. Individuals will be able to rebase their foreign assets to their value on 5 April 2017. As we know well, the Government are removing the outdated concept of domicile status from the tax system and replacing it with a new, internationally competitive residence-based regime from April this year. Currently, where a non-UK-domiciled individual moves to the UK, they are able to access the remittance basis of taxation, under which foreign income and gains are not taxable unless they are brought to the UK. These arrangements can create a disincentive to invest in the UK. The changes made by clause 40 and schedule 9 will remove the remittance basis of taxation from being claimed after 6 April 2025, and this clause clarifies how this legislation operates. Although no new claims can be made, foreign income and gains that have arisen through a remittance basis prior to 6 April 2025 will continue to be taxed at the prevailing tax rates if remitted to the UK on or after this date. Clause 41 and schedule 10 will introduce the new temporary repatriation facility for individuals who had previously claimed a remittance basis, through which they will be able to designate and remit foreign income and gains that arose prior to 6 April 2025 at a reduced rate of tax. That will include unattributed foreign income and gains held within trust structures. That facility, as we discussed in relation to the previous group of clauses, will be available for a limited time period of three years from April 2025, with a rate of 12% for the first two years, rising to 15% in the final year. Clause 42 and schedule 11 introduce a transitional arrangement for capital gains tax purposes. That will allow those who have previously claimed a remittance basis to rebase foreign assets they held on 5 April 2017 to the value at that date, when they dispose of them on or after 6 April 2025. Government amendments 55 and 56 amend the wording of sections 56, 61G and 61R of the Income Tax (Earnings and Pensions) Act 2003 to ensure that those sections, which cover chargeability to tax in respect of deemed employment payment, no longer make reference to domicile, which has become redundant in light of the current reforms. Government amendment 57 amends section 22 of the Finance (No. 2) Act 1931, section 154 of the Finance Act 1996 and section 174 of the Finance Act 1993 to ensure that an individual’s domicile is no longer a relevant consideration for Treasury securities issued with free of tax for residents abroad conditions. Government amendment 58 removes references to domicile in section 614 of the Income and Corporation Taxes Act 1988, relating to relief on income for investments of certain pension schemes, which have become redundant in light of the current reforms. Finally, Government amendment 59 corrects an incorrect reference in schedule 10. Amendments have also been made to the associated explanatory notes to accurately reflect the legislation. The Government are committed to making the tax system fairer so that everyone who is long-term resident in the UK pays their taxes here.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the shadow Minister for his support for this measure. If I understood his comments correctly, he asked a series of questions about the Exchequer impact and estimated costs of the measure itself, whereas the clause we are talking about here is really a consequential and relatively minor technical change to what employers have to say when they notify employees who are taking part in share incentive plans. I could try to look into those questions for him after this Committee sitting, but the information that we are discussing today—the scope of this clause—is actually much more limited than his questions suggest. This clause is really just about employers notifying employees that if they take part in a share incentive plan, it may impact their statutory benefits, which now include neonatal care pay. It does not make any changes to neonatal care pay itself, which is the subject of separate legislation that is not impacted in any way by these clauses. I would not want anyone watching the Committee or reading Hansard to be under the misapprehension that we are in any way changing neonatal care pay, which we think is very important. This is purely about making sure that employees who are considering taking part in a share incentive plan are fully informed of what impact any salary deductions may have on their eligibility for statutory benefits. In terms of implementing the scheme, again, we may be talking slightly at cross purposes. This clause is really about ensuring that employees are properly informed about how the share incentive plan works and the implications of having salary deductions for that, rather than neonatal care pay itself. That would be a separate question to be picked up at another time. Having neonatal care pay is an important change in legislation and we are very pleased that it is part of the landscape of statutory benefits, but this clause does not impact neonatal care pay. It is purely about informing employees of the potential impact of salary deductions when they want to engage with a share incentive plan.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the hon. Gentleman for his questions. It is worth emphasising that this is a small change compared with the rules that already applied from April 2024. In practice, we expect a very small number of companies to be affected by the change, with very few claims to be made before April 2025. Since the change will be a key qualification to the tax rules for a part of the UK, it should be legislated for in the Finance Bill and as part of the Budget process. I hope that helps to explain the process we are taking to implement the changes and reassures the hon. Gentleman that they are small and will affect a very small number of companies. Question put and agreed to. Clause 29 accordingly ordered to stand part of the Bill. Clause 30 Research and development intensity condition: transitional provision Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  I thank the shadow Minister and encourage him to respond in similar terms in future. Question put and agreed to. Clause 43 accordingly ordered to stand part of the Bill. Schedule 12 Trusts: connected amendments, transitional provision etc Amendments made: 60, in schedule 12, page 238, leave out lines 21 to 23 and insert— “(b) the original recipient— is liable neither to income tax nor to capital gains tax by reference to the amount or value of the original benefit, or is a qualifying new resident for the tax year in which the original benefit is provided,”. This amendment expands the scope of the onward gifting rule to circumstances where benefits are routed via individuals who are UK resident but who are not themselves within the scope of the benefits charge (because they are not the settlor or a close family member). Amendment 61, in schedule 12, page 239, line 41, at end insert— “(5A) Where the original recipient is liable neither to income tax nor to capital gains tax by reference to the amount or value of part only of the original benefit, this section applies as if the two parts of the original benefit were separate benefits.”— (James Murray.) This amendment supplements Amendment 60. Schedule 12, as amended, agreed to. Clause 44 Excluded property: domicile test replaced with long-term residence test Question proposed, That the clause stand part of the Bill.

• 28 Jan 2025 · Finance Bill (Second sitting) · Hansard source

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  That was a fairly wide-ranging response from the shadow Minister to what is quite a straightforward clause. I could not help but notice that he began by saying that he supported what we are doing in the clause, that he understood that we needed to take tough decisions and that he will not oppose the decision to extend the freeze to inheritance tax thresholds—which the Conservatives began—for a further two years. He then proceeded to explain why he did not support it. I know the Opposition have not made their policy on many things, but it seems that even individual Members have not made up their minds.