James Murray MP: speeches

Speeches

• 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 As we know well, the Government are removing the outdated concept of domicile status from the tax system and replacing it with a new, internationally competitive residence-based regime from April this year.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.

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

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  I thank the shadow Minister for his broad support for the changes we are making and for recognising the benefit that these measures can bring in supporting the integrity of employee ownership for the future. Where schemes become liable to abuse, it undermines support for them and their longevity. Making sure that the tax reliefs are well designed is important for making sure that this beneficial structure can continue into the future. The shadow Minister asked a specific question about the level of restrictiveness on the relief for distributions from the company and why various decisions and conversations were had on extending the relief to other costs that may be incurred by the trustees. I can tell him that since the autumn Budget, officials have met stakeholders such as the Chartered Institute of Taxation, which raised concerns about the scope of the distributions relief as initially announced. The CIT was concerned that that relief was too narrow to reflect the reality of how employee ownership trust acquisitions are funded. In fact, as the shadow Minister referenced, we accepted those concerns, and tabled amendments 42 and 43 to expand the scope of distributions relief to cover all other expenses reasonably incurred by the trustees in connection with their acquisition of the company. As always, I am grateful to the Chartered Institute for Taxation for the constructive engagement it has given to my officials in discussing these issues. More broadly, the shadow Minister asked a series of questions about policy choices. Of course, the Government keep all policy under review, but it is a question of finding the right balance when calibrating policies such as this to ensure that they use tools of public policy in a targeted way to achieve the right outcome. As I made clear, we were open to feedback from the CIT when it felt that the terms of certain aspects were too restrictive, so we tabled these amendments. Many of the key changes being introduced now were, to give the shadow Minister credit, the subject of a consultation held by the previous Government in 2023, which sought views on proposals to reform the tax regime. We are now putting those into play today. Our proposals, which were initially contained within that consultation, were met with broad support from respondents. They actually form the core of the changes that we are implementing today, notwithstanding the subsequent changes we have made. Our relationship with the Chartered Institute of Taxation and other relevant stakeholders in this space helps to inform the policy decisions we are putting in law today, as well as any future changes to the scheme we might consider. We want to ensure that this opportunity continues into the future and that it succeeds. Making sure that we take proportionate measures to avoid tax reliefs being abused is fundamental to ensuring their longevity. Question put and agreed to. Clause 31 accordingly ordered to stand part of the Bill. Schedule 6 Employee-ownership trusts Amendments made: 38, in schedule 6, page 180, line 32, leave out “by a person (‘P’) other than a company”. This amendment allows for the distributions relief to be given in circumstances where the capital gains tax relief for employee ownership trusts is not available because the vendor of the shares in the company to which the employee ownership trust relates is a company (provided the other conditions for the capital gains tax relief being given are met). Amendment 39, in schedule 6, page 181, line 2, at end insert— “(d) the payment was made for the purposes of meeting the trustees’ acquisition costs.” This amendment requires that the distribution that is the subject of the relief was actually made for the purposes of meeting acquisition costs. Amendment 40, in schedule 6, page 181, line 10, after “trusts)” insert “, but those requirements have effect for the purposes of this section as if references to ‘P’ were to the person making the disposal whether or not that person is a company”. This amendment is consequential on Amendment 38, and secures that the capital gains tax relief requirements are capable of applying properly in circumstances where the vendor of the shares in the company to which the employee ownership trust relates is a company. Amendment 41, in schedule 6, page 181, line 11, leave out “subsection (2)” and insert “this section”. This amendment is consequential on Amendment 39 (and secures that “acquisition costs” is defined for the purposes of the whole section). Amendment 42, in schedule 6, page 181, line 12, after “are” insert “sums expended by the trustees on”. This amendment, and Amendment 43, expand the scope of acquisition costs that can benefit from the relief. Amendment 43, in schedule 6, page 181, leave out lines 13 to 19 and insert— “(a) the acquisition of ordinary share capital in C by the trustees that resulted from the disposal; (b) the repayment of any sums borrowed to fund that acquisition; (c) the payment of interest on any such sums or in respect of any deferral of consideration for the disposal to the extent the payment is not in respect of interest exceeding a reasonable commercial rate; (d) any valuation of C carried out in connection with the acquisition; (e) any liability to stamp duty or stamp duty reserve tax on the acquisition; (f) such other reasonable expenses as are directly connected with the acquisition (but this does not include any expenses incurred in connection with the ownership of the ordinary share capital once acquired).”— (James Murray.) This amendment, and Amendment 42, expand the scope of acquisition costs that can benefit from the relief. Schedule 6, as amended, agreed to . Clause 32 Overseas transfer charge: pension schemes in EEA state or Gibraltar Question proposed, That the clause stand part of the Bill.

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

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  The clause makes small changes to the higher rate of relief available for R&D-intensive SMEs to ensure that the R&D reliefs remain fit for purpose while providing clarity to businesses. The Government recognise the important role that R&D plays in driving innovation and economic growth, as well as the benefits it can bring for society. The R&D tax reliefs play a key role in this. That is why I was pleased to announce in the corporate tax road map published at the Budget that the Government are committed to maintaining the generosity of the rates in both the merged R&D expenditure credit scheme and the enhanced support for R&D-intensive SMEs to increase certainty for companies when making investment decisions. In the Finance Act 2024, the R&D intensity calculation for the enhanced rate of relief did not take account of any expenditure for which a company was entitled to claim research and development expenditure credit. That meant that some companies that were supposed to qualify as R&D-intensive might not meet that threshold. The change made by clause 30 will therefore ensure that research and development expenditure credit-qualifying expenditure is included in the calculation of the R&D intensity ratio, as was always intended. This change will apply to all claims for the enhanced rate of relief from its introduction in April 2023, and to all expenditure incurred from 1 April 2023 in an accounting period that began before 1 April 2024. It will affect some small and medium-sized enterprises that have a high R&D intensity and claim the enhanced rate of SME-payable R&D tax credit relief. This is a small technical change and so it is not anticipated to have any Exchequer or economic impacts. The Government are committed to supporting R&D betterment across the UK through the R&D tax reliefs, which play a key role in supporting our mission to kick-start economic growth. The changes made by this clause will ensure that all companies originally intended to benefit from the higher rate of relief will now be able to do so. I commend clause 30 to the Committee.

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

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  Clauses 23 and 24 make changes to extend the 100% first-year allowances for qualifying expenditure on zero emission cars and plant or machinery for electric vehicle charge points by a further year to April 2026. The first-year allowance for cars was originally introduced for expenditure incurred from 17 April 2002 for low CO 2 -emission cars, including electric vehicles, and eligibility was later restricted to cars with zero CO 2 emissions from April 2021. The first-year allowance for electric vehicle charge points was originally introduced for expenditure incurred from 23 November 2016. These first-year allowances were introduced to support the UK’s transition to cleaner vehicles and were due to expire in April 2025. The changes made by clauses 23 and 24 will extend the availability of the capital allowances for a further year to 31 March 2026 for corporation tax purposes and 5 April 2026 for income tax purposes. This ensures that investments in zero emission cars and charge point infrastructure continue to receive the most generous capital allowance treatment. By extending the first-year allowances for zero emission cars and charge point infrastructure, the measure will provide continued support for the transition to electric vehicles.

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

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  I thank the hon. Gentleman for his support for the clause. We are on a roll of him supporting clause after clause—may this continue throughout the rest of the Bill. The hon. Gentleman rightly recognises that this is a simplification measure on which all Members can agree. As it is a simplification measure, it is non-scoring, so it does not have an Exchequer impact—it simply provides certainty on how the rules as intended will apply. It does not change how the rules apply or make a policy change to the Government’s approach; it makes sure that there is total certainty and clarity about how they will apply. Only a limited number of taxpayers will be affected, and we expect them to welcome the change because of this certainty. I welcome the Opposition’s support for this clause, because I think we can all agree on giving as much certainty to taxpayers and businesses as possible. Question put and agreed to. Clause 22 accordingly ordered to stand part of the Bill. Clause 23 Expenditure on zero-emission cars Question proposed , That the clause stand part of the Bill.

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

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  Clause 19 and schedule 4 introduce the undertaxed profits rule—the third and final part of the internationally agreed global minimum tax known as pillar two. They also amend the existing legislation on multinational top-up tax and domestic top-up tax to incorporate the latest international agreements and stakeholder feedback. It is essential that multinationals pay their fair share of tax in the UK. Pillar two protects the UK tax base from large multinationals shifting their profits overseas to low-tax jurisdictions, by requiring multinationals that generate annual revenues of more than €750 million to pay an effective tax rate of 15% on their profits in every jurisdiction in which they operate. Where their effective tax rate falls below that, they will pay a top-up tax.

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

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  Over the coming years we need to make the transition to electric vehicles. Hybrid cars obviously play an important part in the car market and car manufacturing in the UK. The clauses are about a plan over the next five years or so regarding what will happen to the appropriate percentages. This is not an overnight change. Actually, one of the important principles of our setting out the appropriate percentages now for some years in advance is to give car manufacturers and everyone interested in the car industry certainty about what will happen. That is why, as I have been setting out, the appropriate percentages for EVs will rise, thereby narrowing the gap between them and petrol and diesel vehicles, but there will still be a generous incentive to help to shift people towards purchasing EVs. Hybrid vehicles obviously fit within the general scheme of appropriate percentages. However, as I was setting out, European Commission research shows that emissions from hybrid vehicles are in fact three and a half times higher than previously thought, so in setting the rates for 2028-29 and 2029-30, we have decided to reflect that fact in the appropriate percentages that we are legislating for. That means all cars with emissions between 1 gram and 50 grams of carbon dioxide per kilometre—those that largely fall in the hybrid category—will see their appropriate percentages rise to 18% in 2028-29 and to 19% in 2029-30. As I outlined to the hon. Member for Gordon and Buchan, by setting out the rates until 2029-30 we will give the industry and consumers certainty about the future rates. The company car tax system offers generous incentives to encourage EV take-up and makes an important contribution to the EV transition. The Government, however, must balance incentives against responsible management of the public finances. We are announcing the rates for 2028-29 and 2029-30 to start to narrow the differentials between EVs, hybrids, and petrol and diesel vehicles. I therefore commend clauses 5 and 6 to the Committee.

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

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  Although I am mindful that the clauses are on corporation tax, Mr Mundell, let me briefly respond to the shadow Minister’s comments. This Government were elected to bring an end to the instability that had become endemic under the previous Government. I like the hon. Gentleman a lot, but for him to imply that the previous Government had stability from day to day is for the birds. I was in the House of Commons Chamber so many times for debates on Finance Bills. I think we went through the entire introduction and repeal of the health and social care levy in the space of a few months. There was no stability under the previous Government, and that was a large part of what led people to vote for change at the last general election. They wanted us to sort out the public finances, get public services back on their feet and restore the economic stability that is the bedrock on which investment can rise and on which we can get the economy growing as we know it can, supporting British businesses, entrepreneurs and wealth creators to do what they do best. To bring us back to the clauses, publishing the corporate tax road map shows our commitment to not just campaigning on the prospect of bringing stability but delivering it in our very first Budget. The corporate tax road map clearly sets out our approach to corporation tax, related allowances and other areas we will look at. I may have discerned support for it in the shadow Minister’s comments; it was bound up in other comments but, reading between the lines, I think he supports the publication of the corporate tax road map. He is welcome to intervene if he disagrees.

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

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  As I was saying, we are seeking to calibrate the incentives carefully for the transition to EVs to support manufacturers and consumers and to give as much certainty as possible, while making sure that we have the right support in different parts of the tax system to provide value for money and support the transition in the right way. It is not a question of a single measure being responsible for supporting the transition. This relies on manufacturers and consumers playing their part, but the Government need to play their role, too, which is why this measure sits alongside others we have debated, including those that are not part of the Finance Bill but are part of the Government’s broader agenda. Collectively, they will support this transition. Question put and agreed to. Clause 23 accordingly ordered to stand part of the Bill. Clause 24 ordered to stand part of the Bill. Clause 25 Commercial letting of furnished holiday accommodation Question proposed, That the clause stand part of the Bill.

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

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  The hon. Lady mentions business rates. I do not know whether she has read the discussion paper “Transforming Business Rates”.

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

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  We know that in any local area there needs to be a balance between visitor accommodation and long-term accommodation. I am sure that the hon. Member and others recognise the tension inherent in getting that balance right. We need to ensure not only that we are supporting our visitor economy, but that the tax system supports long-term accommodation for people who live in those areas—not least because those who work in the tourism sector need somewhere to live near their place of work. It is about the balance between supporting visitor economies and long-term residential lets. We agree with the previous Government, who introduced the reform, on this point. The tax treatment of FHL landlords is better if brought more in line with standard residential lets. I will briefly mention the anti-forestalling rule, which is also introduced as part of the Bill. It will prevent the obtaining of a tax advantage through the use of conditional contracts to receive capital gains relief under the current FHL rules. That rule applies from 6 March 2024. In summary, the changes made by the provisions will make the tax system fairer by eliminating tax advantages for landlords who let out their properties as short-term furnished holiday lets compared with those who let out properties for longer periods. FHL landlords will now be treated the same as other residential landlords for the purposes of income tax, corporation tax and capital gains tax. We are grateful to all the stakeholders who have already fed in following the publication of the draft legislation and supporting documents.

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

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  I beg to move amendment 15, in clause 21, page 11, line 21, after “is” insert “or has been”. This amendment makes it clear that new section 690 applies if an employee has been internationally mobile in a tax year, even if the employee is no longer internationally mobile.

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

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  It is a pleasure to serve on the Committee with you as the Chair, Mr Mundell. Clauses 1 to 3 impose a charge to and set the rates of income tax for 2025-26, and clause 4 maintains the starting rate for savings limit at its current level of £5,000 for the ’25-26 tax year. Income tax is the largest source of Government revenue and helps to fund the UK’s schools, hospitals and defence, and other public services that we all rely on. In ’25-26, it is expected to raise around £329 billion. The starting rate for savings applies to the taxable savings income of individuals with low earned incomes of less than £17,570, allowing them to benefit from up to £5,000 of income from savings interest before they pay tax. It specifically supports those taxpayers with low levels of earned income. As Committee members will be aware, both the income tax rates and the starting rate limits for savings must be legislated for each year. The Bill will not change the rates of income tax. We are confirming that they will remain the same, thereby meeting our manifesto commitment not to increase the basic, higher or additional rates of income tax. Clause 1 imposes a charge to income tax for the year ’25-26. Clause 2 sets the main rates of income tax, namely the basic rate of 20%, the higher rate of 40% and the additional rate of 45%. These will apply to non-savings, non-dividend income of taxpayers in England and Northern Ireland. Income rates in Scotland and Wales are set by their respective Parliaments. Clause 3 sets the default rates at the same levels as the main rates, namely 20%, 40% and 45%. These rates apply to the non-savings, non-dividend income of taxpayers who are not subject to the main rates of income tax, Welsh rates of income tax or Scottish rates of income tax. For example, they might apply to non-UK-resident individuals. The clause also sets the savings rates of income tax—again at 20%, 40% and 45%. Clause 4 will maintain the starting rate limit at its current level of £5,000 for the ’25-26 tax year. The limit is being held at this level to ensure fairness in the tax system while maintaining a generous tax relief. In addition to the starting rate for savings, whereby eligible individuals can earn up to £5,000 in savings income free of tax, savers are also supported by the personal savings allowance, which provides up to £1,000 of tax-free savings income for basic rate taxpayers. Savers can also continue to benefit from the annual individual savings account allowance of £20,000. Taken together, as a result of these generous measures, around 85% of savers will pay no tax on their savings income. Finally, I should mention the Government’s efforts to encourage those on the lowest incomes to save through the help to save scheme. We recently extended the scheme until 5 April 2027, and we have extended the eligibility to all universal credit claimants who are in work from 6 April 2025. I encourage Committee members to do what they can to promote the scheme to their constituents. New clause 3 would require a review of how many people who receive the new state pension at the full rate are liable to pay income tax this year and in the next four tax years, and specifically what the tax liability of their state pension income will be. The Government consider the new clause to be unnecessary, given the information that is already publicly available. His Majesty’s Revenue and Customs has published statistics for this tax year and past tax years that cover the number of income taxpayers, including breakdowns by marginal rate, tax, band and age, and the Department for Work and Pensions has published figures for pensioners’ average incomes. The Office for Budget Responsibility is the Government’s independent economic forecaster and most recently published projections of the number of income taxpayers for future years in its “Economic and fiscal outlook” at autumn Budget. Those projections include a breakdown by marginal rate. Income tax is a vital revenue stream for our public services and the clauses will ensure that that remains the case in 2025-26, while also retaining the starting rate of savings at its very generous existing value. I therefore commend clauses 1 to 4 to the Committee, and I urge the Committee to reject new clause 3.

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

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  I am glad the hon. Lady has read it, because it sets out our approach to business rates in the coming year, from April 2026, and what we want to do over this Parliament. Businesses want stability and certainty from Government; they recognise that, over a five-year period, things will happen that cannot be predicted on day one, but they want that certainty and predictability. That is why, in the corporate tax road map, we give certainty on capping the main rate and on the small profits rate, marginal relief, full expensing and the annual investment allowance—everything on which we can give full certainty. However, where there are areas that we seek to explore or consult on, we are also clear about that. We developed that approach in partnership with business to make sure that we give as much certainty up front as we can, while also signposting those areas that we want to discuss.

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

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  With your indulgence, Mr Mundell, I would like to briefly address—

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

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  If I understand the hon. Member’s question correctly, it might relate to clauses in the lease of the property, but I am not quite sure what her point was. I will come back to this if I have misunderstood her question, but clause 5 relates specifically to the tax treatment of these properties. It is about how FHLs, which can still operate in the same way as they have previously in terms of lettings, will be treated by the tax system to bring them in line with standard residential property tax treatment. This is about equalising the tax treatment of FHL landlords and standard landlords, rather than seeking broader changes, which may be what she was alluding to, but I am happy to return to it later in the debate if I have misunderstood her question. This measure does not penalise the provision of FHLs; it simply brings their tax treatment more in line with long-term lets. It does that to remove the tax advantages that FHL landlords have received over other property businesses in four key areas. First, finance cost relief will apply in the same way as for long-term lettings, with income tax relief on their mortgage interest restricted to the basic rate. Secondly, it will remove the capital allowances rule for new expenditure and allow replacement of domestic items relief. Thirdly, it will withdraw access to reliefs from taxes on chargeable gains for trading business assets. Fourthly, FHL income will no longer count as earned income for pension purposes. After repeal, former FHL properties will form part of a person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses. However, the Bill does not equalise tax treatment entirely. Holiday lets, whether they qualify as FHLs or not, are subject to VAT, whereas longer-term, private rented sector accommodation is not. Withdrawal of finance cost relief will mainly affect higher rate and additional rate taxpayers, with basic rate payers largely unaffected. The Government have also introduced transitional arrangements. FHL properties will become part of a person’s overall property business and past FHL losses can be relieved against profits of that business in future years. Existing capital allowance claims can be continued, but new capital expenditure will be dealt with under the rules for standard residential let properties. The legislation also confirms that where a business has ceased prior to April 2025, business asset disposal relief may continue to apply to a disposal that occurs within the normal three-year period following cessation, which is in line with current rules.

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

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  I thank the shadow Minister for his support for the clause. I think his question was about the impact of repealing ORIP. A fundamental point here is that pillar two, which we debated previously, will now tax the profits that were the target of ORIP. Pillar two is expected to raise more than £15 billion over the next six years, so ORIP is simply no longer needed. The Government believe that simplifying and rationalising the UK’s rules for taxing cross-border activities is important, and as such it is right that we use this opportunity to repeal ORIP. Question put and agreed to. Clause 20 accordingly ordered to stand part of the Bill. Clause 21 Application of PAYE in relation to internationally mobile employees etc.

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

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  I thank the shadow Minister for his support for the clause and the amendments. He rightly recognises that this is a simplification to make things happen quicker in the tax system, and we can all agree on that. He raised some specific points, and I will write to him on the detail of the operation of the clause so that he has a record of that. I endorse his call for anyone who has not already submitted their self-assessment tax return to be mindful of the deadline of the end of the month. Amendment 15 agreed to. Amendments made: 16, in clause 21, page 12, line 4, after “being” insert “or having been”. This amendment is consequential on Amendment 15. Amendment 17, in clause 21, page 12, line 22, after “is” insert “or has been”. This amendment makes it clear that a notice under new section 690A can be given during the mobile tax year if the employee has been internationally mobile during that year, even if the employee is no longer internationally mobile. Amendment 18, in clause 21, page 13, line 22, leave out “public notice given” and insert “general direction made”. This amendment means that the requirements of notices under new section 690A will be specified in a general direction made by HMRC rather than a public notice. Amendment 19, in clause 21, page 15, line 38, at end insert— “(3) Any direction given by an officer of Revenue and Customs under section 690 of ITEPA 2003 (employee non-resident etc) has no effect in relation to tax year 2025-2026 or any subsequent tax year.” — (James Murray.) This amendment means that any direction given under the old section 690 will cease to have effect in relation to future tax years. Clause 21, as amended, agreed to. Clause 22 Advance pricing agreements: indirect participation in financing cases Question proposed, That the clause stand part of the Bill.

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

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  I thank the shadow Minister for the comments at the beginning of his speech, if not for all the questions subsequently. First, on the question about whether the £100,000 threshold will be unfrozen in due course, that threshold does not move, and it sets the personal allowance taper beyond that level. The shadow Minister asked broader questions about the personal allowance and our decision to change the policy we inherited from the previous Government. In the many Finance Bill Committees that he and I served on before the general election, the personal allowance would routinely be frozen for more and more years into the future. That is what we have inherited: the personal allowance is frozen up until April 2028. We made clear that we would do things differently. As well as not increasing the basic higher and additional rates of income tax, as we set out, we did not freeze the personal allowance beyond April 2028, which means that it will continue to rise with inflation. The shadow Minister asked specific questions about how the change affects pensioners, and referred to new clause 3, which I addressed earlier. I will repeat what I said: new clause 3 is not necessary because the data the shadow Minister requests is already in the public domain. We need to ensure that as the personal allowance begins to rise from April 2028, that will benefit not just people in work but pensioners, because they will see the personal allowance that applies to their pension income rising as well. That is underlined by the fact that we are maintaining the triple lock, which will see generous increases in the state pension as the bedrock of state support for pensioners. Question put and agreed to. Clause 1 accordingly ordered to stand part of the Bill. Clauses 2 to 4 ordered to stand part of the Bill. Clause 5 Appropriate percentage for cars: tax year 2028-29 Question proposed, That the clause stand part of the Bill.

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

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  The hon. Lady makes a similar point to that made by the hon. Member for Grantham and Bourne, which is that the changes will come in further down the line, but they are critical of the fact that we are pre-announcing the changes now so that we give greater certainty and stability. I cannot understand that criticism, because I thought that giving as much forecasting, certainty and stability as possible would be welcomed by the industry and consumers. People expect taxes to change over time, and the greater the forecasting and advance notice they have, the better for consumers and for manufacturers. Without making this too political, I know that the Opposition were not a great fan of certainty and stability when they were in office, but we are rather different. That is why we are setting out the changes now. The shadow Minister referred to the DFT consultation, and of course, he is right that I would not pre-empt its outcome. In combination, our giving information about what the appropriate percentages will be towards the end of the decade, thereby providing certainty and stability, will help us to work closely with other Departments to ensure that consumers are well informed about what is likely to happen towards the end of the decade and manufacturers have the certainty and stability that were so desperately lacking under the previous Administration. Question put, That the clause stand part of the Bill.