Clause 17
Finance (No. 2) Bill
9:30 am
Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)
I take the opportunity to welcome the Paymaster General to our debate on this part of the Bill.
In essence clause 17 is enabling, designed to permit the redrafting of schedule 10 of the Value Added Tax Act 1994, which deals specifically with the taxation of buildings and land. As the explanatory notes to clause 17 of the Bill point out:
“The VAT option to tax land and buildings legislation in Schedule 10 to the VAT Act 1994 is one of the most complex parts of the VAT legislation”.
The eyes of the hon. Member for Wolverhampton, South-West (Rob Marris) are positively lighting up as he reaches for the explanatory notes. I can see that he is not about to disappoint us.
The chief reason for this degree of complexity has been the piecemeal addition to schedule 10 since its introduction, chiefly by means of secondary legislation usually designed to add anti-avoidance measures to the original schedule. For instance, as just a small sample of the changes over the past 12 years or so, we have seen the Value Added Tax (Buildings and Land) Order 1994, which was the first attempt to tackle lease-back and similar anti-avoidance schemes. Then, as a further example, the Value Added Tax (Buildings and Land) Order 1999 closed a perceived loophole in the earlier anti-avoidance provisions. The Value Added Tax (Buildings and Land) Order 2004 aimed to head off further avoidance schemes used by partly exempt businesses, which the Treasury perceived to be another loophole.
The accumulation of secondary legislation has made the amended schedule 10 increasingly difficult to interpret in practice, to a point where HMRC’s partial regulatory impact assessment, which was released to accompany that proposed rewrite, admitted with admirable frankness,
“Adding layer upon layer of anti-avoidance provisions on to legislation that also has to deal with the complexities of English and Scottish land law has led to complaints about its complexity and virtual incomprehensibility.”
Indeed, the introduction of the consultation document provided advice that should perhaps inform the whole of our proceedings, with the recommendation that
“taxpayers would benefit from tax law which is clearer and easier to understand, and HMRC would benefit from being able to explain the law more easily”.
Finding any member of the Committee who would contend with that would be difficult.
There appears to be a broad consensus about the need for schedule 10 to be rewritten. The consultation document, which was issued in December 2005, laid out the general lines along which this would be undertaken. Moreover, the Paymaster General helpfully wrote to members of the Committee on5 May, providing copies of the draft Treasury order that would in effect rewrite the schedule. Members of the Committee should have had the opportunity at least to glance at that, although there has not been an opportunity to consult the professional bodies, because that draft order has only just emerged.
In particular, I note that the draft order is now designed to come into force on 1 October 2006. We have a timetable for implementation.
Rob Marrisrose—