Clause 38 - Provision of services through an intermediary: minor amendments
Finance Bill
5:30 pm
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
The clause introduces three minor amendments to service company legislation. They are necessary to maintain fairness of treatment for employees and service company workers who work on terms similar to those of employees. We have published separately some amendments to deliver the same proposed changes for national insurance purposes.
Our three proposed amendments fall into broad categories. First, service company workers will get the same relief that conventional employees receive under the new mileage allowance regime for business travel, which came into effect on 6 April 2002. We are not correcting something; we are extending new arrangements. Secondly, partnership intermediaries who reimburse certain allowable expenses to a partner will be able to claim relief for those expenses in the same way as a service company intermediary. Thirdly, service company intermediaries who cease trading during the course of a year will be able to claim appropriate relief in their final corporation tax accounts for the deemed schedule B payment that they are required to calculate under the service company legislation.
Taken together, this small package of changes ensures the continued fairness of treatment that the Government sought to establish between employees and people working through an intermediary or on similar terms to an employee.
Amendment No. 14 would replace a large part of the clause with a short form of words apparently seeking to put those affected by the service company legislation
and those who are directly employed on the same footing with regard to their entitlement to tax relief and allowances under schedule E.
I reassure the Committee and the hon. Gentleman that the amendment is not necessary. The service company legislation already entitles workers affected by it to the same tax reliefs and allowances under schedule E as those who are directly employed. The clause ensures that that remains the case and, as I have already explained, includes certain travel expenses, following the introduction of the new mileage allowance scheme. Therefore, the amendment would, at best, be unnecessary.
I must explain to the hon. Gentleman what the amendment would go on to do, in case he wants to press it to a vote. Contrary to its apparent intention, and I accept what the hon. Gentleman says, the amendment would undermine the treatment that it appears to try to guarantee. It does not need to guarantee it, because it is already there.
First, by stripping out the relevant cross-references to the mileage allowance rules, the amendment would deprive those affected by the service company legislation of the same entitlement to tax relief as a direct employee. It would strip away the parity that the clause puts in place. Secondly, by removing the section on reimbursed expenses, the amendment would prevent partnership intermediaries from being able to claim a deduction for expenses reimbursed to workers that a service company intermediary could claim. Therefore, not only is the proposed amendment unnecessary, but, unfortunately, it would impose on the intermediary companies an unfairness that it does not seek.
I accept what the hon. Gentleman said earlier: that the amendment was drafted to ensure parity. I have given him the undertaking that that is there. I have explained that on this occasion, in the best interests of saving the hon. Gentleman's reputation—[Hon. Members: ''Oh!'']—outside the House, I gently suggest to him that he should not press the amendment to a vote. He may wish to reconsider it, but if he presses it to a vote, he will damage the companies that he claims he is trying to help, and I am sure that he does not mean to do that.