(except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and - Schedule 2 - Disclosure of value added tax avoidance schemes
Finance Bill
9:30 am
Mr Howard Flight (Shadow Chief Secretary To the Treasury, Economic Affairs; Arundel and South Downs, Conservative)
I thank you for your comments, Mr. McWilliam. There was discussion as to whether there should have been a broad debate on clause 19—the introductory clause—or schedule 2. There was a stand part debate on clause 19 covering the whole territory. I was merely making the point that the Economic Secretary has not yet responded to some of the issues raised in that debate that are relevant to the two amendments.
The amendments are designed to bring better proportionality to the proposed measures in the schedule. As pointed out, the provisions are likely to result in excessive and unnecessary compliance burdens and costs for business. Equally, as has occurred in the USA, they are likely to lead to Customs and Excise being snowed under with reports, especially where the requirements are too loosely drawn for businesses with a turnover of more than £10 million. How many extra Customs and Excise staff are the Government proposing to take on to deal with the processing of reports?
As with many other measures that have been introduced, such as the lowering of tax rates on small businesses that are incorporated, the Government fail to heed our warning on this matter at their own risk. Hon. Members will appreciate that schedule 2 provides two different, wide-ranging sets of powers for Customs and Excise to be defined and determined in regulations. However, even if the regulations confine reporting objectives to specific schemes, they are unlikely to reduce the potential burdens on Customs or business.
Amendment No. 7 would require the Treasury to include in any scheme designation details of the way in which the designated provision may be used to avoid VAT. The objective is to assist business in complying with VAT scheme reporting obligations in respect of such arrangements, and, with regard to paragraph 5, to make it impossible for Customs and Excise to overdesignate or designate provisions without supporting explanations of the nature of the abusive scheme that it seeks to deal with.
Amendment No. 8 has two purposes. First, it would substitute a main benefit approach for the existing main purpose approach test in paragraph 5. The Inland Revenue clauses later in the Bill apply a benefit test rather than a purpose one. We suggest that taking the benefit rather than the purpose route would make the objective of providing more objectivity in defining the application of the clause more achievable. It should be easier to define the benefits that flow from an arrangement than to determine their purpose, which will inevitably be subjective and will reflect what the individuals in any business that has put such arrangements in place think that the purpose might be. In our view, the VAT clauses should follow the same approach as the later Revenue clauses.
Secondly, the amendment would tie the reporting requirement to the sort of arrangements that the Treasury had in mind in designating the provisions. The combined objectives and intended effects of our two amendments would be to reduce the number of cases to which the provisions could apply, without reducing their effectiveness, and to lessen the potential for snowing under of the Customs and Excise officials involved in operating the measures in schedule 2.