Finance (No. 2) Bill
Martin Caton (Gower, Labour)
With this it will be convenient to discuss the following:
Amendment 13, in page 107, line 16, leave out ‘24 March 2010’ and insert
Amendment 16, in page 108, line 4, leave out ‘24 March 2010’ and insert
David Hanson (Delyn, Labour)
Clause 31 and schedule 14 provide an exemption from inheritance tax, capital gains tax and income tax for trustees of trusts dealing with asbestos-related conditions. The trusts that will benefit are those established on or before 23 March 2010 as part of an arrangement made by a company with its creditors specifically to pay compensation to, or in respect of, individuals with asbestos-related conditions.
The provisions are extremely welcome. They will benefit trusts established to pay compensation to individuals with debilitating conditions that are related to their exposure to asbestos, by and large in the workplace. Although the tax relief on inheritance tax, capital gains tax and income tax is welcome, hon. Members will see that the date determining receipt of the benefit of tax relief in the schedule is 23 March. That was set out by my colleagues in the previous Government in this year’s Budget on 24 March.
What has happened in relation to the period between 23 March and the Bill’s receiving Royal Assent, which may come at any time between now and the end of December or early January? I would not wish to create an anomaly whereby trusts established after 23 March and before Royal Assent would not be eligible for the exemptions from inheritance tax, capital gains tax and income tax because, although the Bill had received Royal Assent, they had been established after 23 March.
I confess that I am not aware of any such trusts, but I tabling the amendment because it would allow the Treasury’s great resources to be used to determine whether any trusts had been established between 23 March and today—28 October—and, indeed, so that we could find out whether officials are aware of plans to establish trusts between now and the possible date of Royal Assent. If there are any such trusts, or plans to create them, that could create an anomaly in the treatment of the two sets of trusts that would be dealing with the same issue: individuals who have asbestosis or who are dealing with asbestos-related disabilities, injuries and illnesses. Such an anomaly would make the legislation unfair.
Obviously, people establishing trusts after Royal Assent will understand what will happen at that time. At the moment, however, we have a possible anomaly in that a trust could be established before Royal Assent—next week, the week after or in December—but the conditions applying to it would not be the same as those that would apply to trusts established on or before 23 March.
Will the Minister indicate whether he is aware of any trusts established between 23 March and now that could be disadvantaged because they are not covered by the clause? Secondly, is he aware of any trusts that might be established before the likely date of Royal Assent? Finally, does he have a view on the tabling of an Opposition amendment—or, if such an amendment would, as usual, be technically deficient, a Government amendment—on Report to reflect my desire to ensure that no trusts are disadvantaged by the fact that the date in the schedule was set before the election and this year’s Budget?
Perhaps I should have raised this point during our proceedings on clause 31, rather than schedule 14, but just for the sake of clarity, I would welcome it if the Minister would say a few words about what he deems to be an asbestos-related condition. Paragraph 21 of the explanatory notes to clause 31 states:
“Asbestos related condition is a condition that arises as a result of contact directly or indirectly with asbestos. It is not defined further in these provisions, but includes conditions that are recognised by the courts as arising as a result of contact with asbestos, such as asbestosis.”
I am concerned that the note gives one example—“such as asbestosis”—but does not clarify what other conditions could be included for a trust established to deal with potential issues of ill health.
Chris Evans (Islwyn, Labour)
First, I apologise for my lateness this morning, which was down to a diary clash. My right hon. Friend talks about conditions that cause asbestosis. He will be aware of an ongoing campaign to compensate those victims who have pleural plaques and scarring of the lungs. Does he think that the scheme should also include such people?
David Hanson (Delyn, Labour)
I raised the issue because I know that my hon. Friend takes an interest in these matters, given the nature of his constituency. It is for the Minister to expand on what paragraph 21 of the explanatory notes means in practice. It states:
“Asbestos related condition is a condition that arises as a result of contact directly or indirectly with asbestos.”
That is fine; I accept that as a reasonable definition. The condition is not defined further in the Bill, but the notes say that it
“includes conditions that are recognised by the courts…such as asbestosis.”
That is my concern. If the background note did not state, “such as asbestosis”, I might accept the wide definition. The moment “such as asbestosis” is included, however, one must ask, if it is not a condition “such as asbestosis”, what is it? There could be a future debate about the relationship between the definition of asbestos-related conditions and the establishment of the trusts prior to 23 March or, as under my amendment, after 23 March. I would welcome the Minister’s consideration of that date and a short comment about the background note and definition.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
It might be helpful for me to say a word or two about the background to clause 31 and schedule 14. As we have heard, the schedule concerns the taxation of trusts set up in certain circumstances to compensate victims of asbestos. The inhalation of asbestos fibres can cause a number of diseases of the lungs, and prolonged exposure to asbestos exacerbates the risk of contracting such a disease.
It has come to the Government’s attention that trusts set up in certain circumstances to compensate asbestos victims have been unable to access tax-efficient structures. Consequently, such trusts are facing tax liabilities that will reduce the funds available to asbestos victims who are eligible for compensation. For example, if a trust is set up across more than one national legal jurisdiction, which can happen where compensation arrangements are complex, it can be difficult to rearrange trust structures. Trusts might not be able to obtain charitable status if they are set up specifically to compensate certain victims.
To help victims of asbestos, the changes set out in schedule 14 will remove past and future inheritance tax, income tax and capital gains tax liabilities from asbestos compensation settlements. The change was announced by the previous Government, and we are happy to confirm it. Many years often elapse between exposure to asbestos and the emergence of symptoms of asbestos-related illnesses. We need to address that point.
The right hon. Member for Delyn asked about the sort of asbestos-related conditions to which the schedule will apply. As he mentioned, asbestosis is given as an example, but that is not an exhaustive list. It could apply to other diseases and illnesses related to asbestos. It is likely to apply to trusts making payments to those with an asbestos-related condition, which might include those who were engaged in the manufacture, distribution, sale and installation of asbestos products, or the mining of asbestos. The terminology has been kept deliberately wide to allow flexibility in such circumstances. The hon. Member for Islwyn asked whether the list would include pleural plaques. It does; our intention was not to be prescriptive.
I want to turn to the very fair point that the right hon. Member for Delyn raised about his amendments, which would change the latest date by which a trust would have to have been established to benefit from tax relief under the schedule. He proposes that the date should be changed from 24 March 2010 to the day of the Bill’s Royal Assent.
The date of 24 March 2010 was the date of the first Budget this year, when the measure was first proposed, and it was chosen as the cut-off date by the previous Government. It is my understanding that that was to eliminate any risk of avoidance—however small—due to new trusts being set up to exploit the rules. Of course, the Government would consider representations from trusts in similar circumstances that were set up after that date. However, to answer the right hon. Gentleman’s question directly, I should stress that we have not received any such representations. We do not know of any trusts in similar circumstances to those set out in the schedule that have been established after 24 March 2010, and we are not aware of any plans for such trusts to be established.
It is also worth pointing out that a specific exemption, as we have with the clause and the schedule, is not likely to be necessary in most cases for most trusts in these areas. Generally, when trusts of this nature are set up, exemptions are already available.
Consequently, although I understand the intention behind the amendment, and while I think that the right hon. Gentleman was absolutely right to ask his questions, it is not necessary that we amend the Bill as he proposes because doing so might leave open an opportunity for avoidance. I therefore ask him to withdraw the amendment.
David Hanson (Delyn, Labour)
I am grateful for the Minister’s comments. As I indicated, the amendment was probing, first to find out the definition of “asbestosis” and, secondly, to ensure that the Treasury had researched whether there were trusts that had been established after 23 March 2010 or that were due to be established. I was sure that the Treasury could research that more easily than me, as my efforts were limited by having only one researcher. Given that the Minister has assured us that there are no trusts in that position, I beg to ask leave to withdraw the amendment.