Clause 52
Finance Bill
1:15 pm
Stephen Timms (Financial Secretary, HM Treasury; East Ham, Labour)
I am with the hon. Member for Cities of London and Westminster on this one in the debate we have just heard. The hon. Member for Taunton is absolutely right that a lot of foreign workers on low incomes come to the UK and might well fall within the remittance regime—people working in agriculture or construction—and it was never our intention to bring low-paid workers into self-assessment in that way, still less so when there is no tax involved. The clause introduces an income tax exemption on overseas income, which effectively removes the obligation to file a self-assessment return from anyone who has foreign employment income of less than £10,000 in any tax year, as we were discussing a moment ago.
People might also have small amounts of income from bank accounts or other investments overseas in addition to their foreign employment income. That would again trigger an obligation to file a self-assessment return and, again, that was not the intention. The change here is that people with overseas bank interest of less than £100 in any tax year will still be able to take advantage of the tax exemption. I should clarify the fact that the clause requires that the foreign income must be subject to a foreign tax. That does not mean that the person must actually have paid tax on the income in a country other than the UK. It could well be that the income in question is liable to a tax rate of 0 per cent. or could be covered by overseas personal allowances, in which case no tax would be payable on it but it would still count as subject to a foreign tax in this clause.
I think that the hon. Member for Cities of London and Westminster is right: an investment income of £100 in the current environment does equate to a significant capital saving. That is set at the right level in the current environment to ensure that the people who are the target of this measure will not be brought into self-assessment. An investment income of £500 would mean a significant capital sum. The clause deals with individuals on low incomes who come to work in the UK in the sort of situations that we have discussed. I am not aware of any evidence of a need to increase the threshold, and I am confident that nobody will be prevented from taking advantage of the tax exemption and the administrative relaxations that it delivers. I accept that we should keep the matter under review, as circumstances might change and the threshold might need to be raised, but the £100 level is right for now.