Finance Bill - Second Reading (and remaining stages)

– in the House of Lords at 7:50 pm on 15 November 2017.

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Moved by Lord Bates

That the Bill be now read a second time.

Photo of Lord Bates Lord Bates The Minister of State, Department for International Development

My Lords, the Lords Finance Bill debate gives us the opportunity to bring to bear the wide range of expertise that this House possesses on the issue of tax reforms. I particularly thank the Lords Economic Affairs Finance Bill Sub-Committee for its report, Making Tax Digital, and I am delighted that several members of that committee—including the noble Lord, Lord Turnbull, and my noble friends Lord Wakeham and Lord Leigh—will participate in the debate. I look forward to their contributions and to those of others.

The scrutiny of the Bill that comes both from the Finance Bill Sub-Committee and in this debate is invaluable to making our tax system stronger, and I thank noble Lords for their contributions. This year, the Finance Bill has taken an unusual route to get here. The clauses it contains were introduced first in March and withdrawn from the Finance Bill passed before the general election. This Bill makes sure that all in this country pay their fair share of tax, that our public services have the funds they need and that our tax system is as modern as the economy over which it presides. Fundamentally, it is a Bill to make Britain a fairer and more prosperous nation.

I turn first to the issue of tax avoidance and evasion, which is a major theme of the Bill. This Government have done more than any other in its crackdown on tax avoidance and evasion. The tax gap is at a record low of 6% and we are bringing in £11.8 billion more each year as a result of the new measures introduced. Since 2010, HMRC has secured over £160 billion in additional tax revenue as a result of tackling avoidance, evasion and non-compliance, helping the UK to achieve one of the lowest tax gaps in the world. This includes more than £53 billion from big businesses and more than £2.5 billion from the very wealthiest. The second 2017 Finance Bill introduces over 10 policies to help build on this work.

For too long, employers and their employees have participated in disguised remuneration schemes, hiding salary in interest-free and tax-free loans. This Bill strives to bring an end to that practice by placing charges on such loans. This change alone will bring in an extra £3 billion by 2021, all of which can be spent on our key public services. Alongside that, the Bill works to strip the rewards from those who enable tax avoidance, imposing 100% fines on fees earned from enabling defeated avoidance schemes. This is not about penalising the tax profession. It is about making sure that deliberately enabling tax avoidance is not a profitable enterprise.

Finally, we are granting new powers to HMRC to deal with VAT avoidance by overseas companies using UK-based fulfilment houses. These overseas companies have for too long avoided their VAT obligations, undercutting British business. Now, HMRC will be in a better position to tackle this unfair practice.

Not only are the Government committed to clamping down on avoidance and evasion, but they are also working towards making the whole tax system fairer and more sustainable. In law, since colonial times, permanent non-dom status has become a source of inequity in the British tax system. These people live in Britain for the vast majority of their lives. They draw on public services and the opportunities our country offers but pay a lower rate of tax. There is no denying the contribution that non-doms make to this country. They are in many ways a great import, bringing in talent, skill and cultural diversity. But if you live in Britain for a long time, you should pay your taxes like everyone else. By getting rid of permanent non-dom status and ending the qualification for those who have lived in Britain for more than 15 of the last 20 years, the Bill ends an inequity. Permanent residents of this country should pay tax just like everyone else—and now they will.

As well as reforming the treatment of non-doms, we are also making fair and reasonable adjustments to the way in which businesses can claim interest expenses and calculate their losses. Thanks to these changes, big businesses will no longer be able to claim excessive tax deductions on interest payments or offset their new profits with old losses, getting out of paying fair amounts of tax. Each of these measures brings in vital revenue to help fund the public realm: schools, hospitals and universities. They are fair, proportionate and progressive.

Britain faces a historic challenge and opportunity. The economy is changing and developing rapidly. For the Government to keep pace with the increasingly digital world, the way we interact with people must be modernised, too. This goes for our tax system as much as in any other area. That is why, over the next five years, we will be making tax digital. Every year, avoidable errors cost HMRC £9.4 billion—money that could be spent on key public services. By digitising our tax service, we will make it easier for businesses to get their tax right. The new system will help make tax an integral part of their business, rather than a burdensome process to be completed separately.

However, we understand that this is a big change. Indeed, various challenges faced by businesses in this transition were highlighted by the Lords Finance Bill Sub-Committee in its report, which I referred to at the beginning of my remarks. I will now respond to some of the points raised in that helpful report by setting out the Government’s position.

The sub-committee asked that making tax digital should be implemented from 2020. We saw the benefits of allowing businesses more time to adjust and have pushed back any mandatory implementation until 2019. Even then, it will be only on VAT and only for larger businesses. We believe that this strikes the right balance between allowing us time to properly pilot the changes and ensuring that businesses and the public purse see the benefits of the new system as soon as possible. The sub-committee recommended that businesses trading below the VAT threshold could not be expected to be ready to implement only a year after larger businesses and that it was unfair to subject them to an untested system. We heard that and we saw that it was right. Businesses below the VAT threshold will be able to adopt making tax digital on a voluntary basis and at their own pace.

The sub-committee raised a number of points about the scope and timetable for the programme and we have responded. It also had concerns about having time to test making tax digital. The pilots have already begun and we are encouraged by the aspects of the system that we have been able to test so far. We will ensure that making tax digital is shown to work before we introduce it for taxes other than VAT. This is a change that is as good for business as it is for government, and we will make sure that it goes ahead and is a success.

It has been pointed out that this is a long Bill, and there is no denying that. It is long because we have made vital changes to complex law, especially around interest expenses and loss calculation. It is not a good idea to avoid length if it means neglecting certainty and precision on tax obligations. We have avoided doing just that—for which it seems strange to have to apologise, but I recognise that it is a weighty document.

This is a forward-looking Bill that makes our tax system fairer and more progressive and readies it for the future. Its measures will bring in extra revenue for our public services while making sure that our tax system remains competitive and that Britain remains a place where businesses can thrive. It will reform non-doms to make sure that people pay their fair share; crack down on tax avoidance to force businesses to comply with the spirit, not just the letter, of the law; and bring tax into the modern age by making it digital. It has been consulted on, critiqued and strengthened by the wide-ranging scrutiny of Parliament, including this House, and the business world. It is thorough and it is necessary. I therefore commend the Bill to the House and beg to move.

Photo of Lord Turnbull Lord Turnbull Crossbench 8:00, 15 November 2017

My Lords, I am pleased to introduce the report of the Sub-Committee of the Economic Affairs Committee on the draft Finance Bill 2017. It was prepared under the excellent chairmanship of the noble Lord, Lord Hollick, before his term ended. I thank our two advisers, Elspeth Orcharton and Tony Orhnial. It is a funny old world in which we are debating this—only days before the next budget cycle starts—but then 2017 has been a funny old year anyway.

As tax policy and rates are outside its remit, the committee looks into issues of administration and simplification. One issue leapt out of the Bill. Making tax digital, as the Minister indicated, covers only nine pages out of 660 but we were extremely concerned by what we saw. In the original plans there were proposals to require all companies, large and small, plus unincorporated businesses and private landlords—about 5 million entities—to keep records digitally using not only spreadsheets but software compatible with HMRC systems; to submit a tax account quarterly; and to prepare an annual statement. This was to apply to all taxpayers with incomes of over £10,000 a year unless they secured an exemption as digitally excluded, which is not easily done. It was put to us that 80% of farms have broadband speeds below the Government’s minimum standards. Note that this is income over £10,000—not net income or profit—and that this level is below the personal allowance and the minimum wage.

We also found that the consultation process was inadequate and taxpayer awareness of the changes was low. HMRC was making the elementary error of moving to the next phase before the results of any pilots were available and analysed. Even on HMRC’s own figures, it will take businesses 10 years to recoup the start-up costs from the savings made; software development was lagging behind schedule; and inadequate provision was being made for businesses with irregular or seasonal incomes, such as farmers, performers and those working in the gig economy. We were told that 53% of independent retailers still had no electronic point of sale. So it has a lot of ground to cover.

When a major change is introduced, it is better practice to start with larger businesses, which are better equipped, moving down to smaller ones as experience is gained, as was done with pensions auto-enrolment. However, this time, HMRC was starting at the bottom. Why was it behaving in this way? The answer is that it believes that by making small businesses keep quarterly, rather than annual, accounts, it would collect more tax—around £1 billion per annum—by reducing errors and carelessness. Few people believe that this was plausible. It was pointed out that errors could go both ways and better advised taxpayers could end up paying less. The timetable was being driven not by what made sense for the project but by what had been agreed by the OBR and put into the Budget arithmetic.

The FBSC recommended: a slower timetable to allow more consultation and a better pilot study to be completed; no mandatory digital reporting below the VAT threshold, then £83,000; more attention to non-standard businesses; an updated impact assessment for taxpayers; and an updated business case for HMRC. I am pleased to report that HMRC, having for months shown little sign of movement, has brought forward some welcome changes, which were announced in June of this year and which the Minister has just repeated. These include: a slower timetable; no mandation below the VAT threshold, though businesses can opt in; and, above this threshold, initially only VAT submissions are to be digital, with other taxes not brought in until after 2020.

We do not know if this was the result of genuine conversion or just the expediency of jettisoning anything controversial in the post-election panic—but let us give the Government the benefit of the doubt.

So is it job done and a victory for parliamentary scrutiny in this House and the other place? Not quite. The most egregious flaws have been addressed but there are still concerns in the taxpayer community. Taxpayer awareness remains low and the pilots are still seen as too limited. It is far from clear that the principle set out by the noble Lord, Lord Carter of Coles, in his 2006 report on online taxation is being observed—that is, that capacity should be tested at least a year before implementation. There is no sign yet of the revised impact assessments and no clear road map for the proposal to widen the scope of making tax digital beyond VAT.

What are the general messages from this controversy? First, I should make it clear that the committee fully endorses the view that the adoption of digital technology for delivering public services will grow and grow, but the pace and sequencing require careful planning and efforts must be put in to helping all taxpayers to prepare. Businesses come in all shapes and sizes and have different capabilities. Secondly, departments must look at the totality of interventions on the sector. At one point it looked as though the self-employed could be hit by paying more tax, incurring higher costs, higher business rates and higher national insurance contributions while they saw corporation tax being cut and the IT giants getting off lightly. Fortunately that train wreck seems to have been avoided. Thirdly, it is dangerous to introduce major changes to meet an arbitrary timetable for increasing revenues.

There is another wider lesson for HMRC and DWP. They need to recognise just how complicated and chaotic are the lives of many in the poorer and less well-educated parts of society and just how financially precarious they are, as revealed by the recent report by the Financial Conduct Authority. Making tax digital is not the only scheme that has run into criticism for failing to recognise this. The noble Baroness, Lady Primarolo, will well remember the difficulties facing the introduction of tax credits. The same is happening right now with universal credit.

The history is that, for many decades, the Inland Revenue tried to reduce the frequency of its contact with individual taxpayers, through PAYE, MIRAS, interest and dividends deducted at source. The arrival of tax credits has put that into reverse. However, an organisation staffed by highly professional people—mostly graduates—in secure jobs, being paid regularly and with financial resources to fall back on, may find it difficult to empathise with families whose circumstances can change by the day and who are living on the breadline. My final recommendations are that those tax and benefit officials dealing directly with the public should spend time at a CAB office, a debt charity or an MP’s surgery. Then they should tune into “The Archers”—not for the love lives of teenagers or pensioners, which feature so prominently these days, but to follow the fortunes, or otherwise, of the Grundy family, who are scratching a living on all kinds of dodgy enterprises and are barely making ends meet. Officials should ask themselves before they press the button on something like MTD: do the Grundys understand what is being asked of them and can they cope?

In conclusion, there were many pressures on government to modify the original MTD proposals. What we have now is significantly better than it was a year ago and for that this House can claim some credit. I hope, however, that the Minister will convey the remaining concerns back to HMRC and the Treasury.

Photo of Lord Wakeham Lord Wakeham Conservative 8:07, 15 November 2017

My Lords, before I say what I am going to say about the Finance Bill, I have been waiting for an opportunity to say how much I appreciate my noble friend’s contributions from the Front Bench. He seems to be speaking on all kinds of different subjects at all kinds of different times and every time he does so he is well informed, has done his homework, is courteous and is a great tribute to the House in the way he acts as a Minister. I hope he does not mind me saying that because, as my next sentence, I am going to say that I have been party to the Select Committee report that the noble Lord, Lord Turnbull, has spoken about and it is the most critical report I have ever been associated with in over 40 years in Parliament—so I thought that would be a good way to start.

We all think that making tax digital is the right way to proceed, and it is strange to be as critical as we were of a proposal which, in essence, we think ought to happen. It is a peculiar situation in which to find ourselves. No doubt there are objections to what has been done. This morning I received in the post something like 15 pages of criticism of the proposals from the Chartered Institute of Taxation. I have to say to the Minister that the Government are not yet finished in terms of getting these proposals right, although in principle they are.

I want to comment on how it could have happened like this because it is intriguing. As soon as I saw that this was the way we were working, I made sure that the Prime Minister in No. 10 knew what was coming, because that is where it would have ended up. The proposition that a Government could bring in taxation changes that would be damaging to the small business community in our country while more sophisticated operators with their advisers could get away with it is a proposition that you realise was simply never going to run in the way it was originally envisaged. There was a great deal of logic in what HMRC was trying to do, but in my view the way it set about doing it was completely wrong. I want to discuss briefly what went wrong and perhaps how that can be avoided in the future.

We have to ask the Government to look at the effectiveness of HMRC’s consultation process. I have had no part in it for a long time now, but when I was a Treasury Minister, my boss Geoffrey Howe asked me to see if we could improve the consultation process. I have to say that my work was not entirely successful. The Inland Revenue, as it was known in those days, wanted to know exactly what issues were going to be raised, particularly so that at meetings its officials could speak with one voice and carefully make sure that they did not have to concede anything. I am afraid that the special advisers were not in a much different position because they themselves had negotiated with all the other professions what they were going to say, so as far as I could see those meetings were, at best, things of minds that were not really prepared to negotiate at all; they just wanted to reiterate their points. I do not say that some good was not produced from time to time, but the consultation was not nearly as effective as it should have been. If that is the sort of consultation which is going on at the moment, it is not surprising that we get some of the results wrong. Going back all those years ago to when I was a Treasury Minister, I asked Geoffrey Howe’s permission to have another go. We found two or three eminent professional people who would come in and talk about these things informally, off the record and in a quiet and effective way. That was infinitely more effective than the formal process of the two sides marching in and doing battle, so it was much more useful.

To its credit, HMRC can see the problems and has tried to deal with some of them, but I am not convinced that its process of consultation, which should have avoided many of these problems, was anything like as good as it could have been. I say that because it was obvious what was going to happen. My recommendation to the Government is that they should take another look at the consultation process to see whether it could be more effective in the future for other things they want to change.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour 8:13, 15 November 2017

My Lords, the noble Lord, Lord Wakeham, has taken me back to those long nights we used to spend on the Finance Bill in the House of Commons. We would go in at around three o’clock in the afternoon and come out at seven o’clock or eight o’clock the following morning. I worked for something like eight years on those Finance Bills in the 1980s and I always remember Peter Rees, who came here subsequently, standing in his braces early in the morning asking for his breakfast in between amendments. They used to bring it in for him on a plate. However, he is no longer with us.

When I decided to speak on this Bill, I went to the Printed Paper Office and was given a copy of the Bill. I have never seen a Finance Bill as large as this in my life. When I was in the Commons the Finance Bill was about half an inch wide, now it is more than an inch wide. I do not know what is going on, so obviously something is happening which I do not quite understand.

I want to concentrate on three issues. The first is inheritance, the second is stamp duty and the third is the treatment by HMRC of private landlords. Inheritance tax is referred to in Clause 30 but is limited to dealing with rules on residence. No reference at all is made to stamp duty, although it is a hot subject in the country because of people’s concerns about the way the current system, with its surcharge, is operating. Private landlords are dealt with in Part 4 of Schedule 4, but it seems to deal only with losses on property as against profits and their taxation.

I shall start with inheritance. I should make it absolutely clear that I am totally opposed to the system as it currently operates. I am opposed to the seven-year tapered relief arrangement. Indeed, some years ago I was asked by family members to help arrange a will that would take advantage of the seven-year arrangement, but as a matter of principle I refused to do it. In my own case, I would not dream of doing it in my will. I very much favour the 10% reduction for those who make charitable donations, which in effect reduces the rate from 40% to 36%. We have taken advantage of that within my own family. I am also, as are we all, pleased with the arrangements for inter-spouse transfer free of tax. However, I believe that we could raise far more money under the inheritance tax arrangements.

I have spent some time looking at what happens in Germany, which has a very successful economy. I suspect that we could learn a lot from Germany in many areas of taxation and industrial strategy. The Germans pursue a system which for years I have been arguing for, whereby the tax is paid by the beneficiaries, not by the deceased’s estate. If we were to go down the German route, we would then pay in the UK context tax on inheritance at a person’s marginal tax rate, but we would have a differential threshold for family, friends or charities. We could have a different threshold for each group of recipients. But the recipients of a will would pay the tax at their marginal rate over and above the threshold. This has one great advantage: it really does lead to a wider distribution of wealth. Those who want to minimise their tax liability will spread their estates more widely so that more people benefit. If they are on a low marginal rate or not paying any tax, they may well gain from the arrangement I am advocating.

However, I think that overall it would actually lead to a far greater tax take. I have tabled Questions about this matter, but the Treasury has never done any work on it. I think it is somehow fearful of upsetting the public, but I do not think that it would. A lot of people in this country are worried about the effect of inheritance tax on the property market. It is grossly inflating the price of housing. I know that over the years my own party has been fearful about looking at this, but it is the way forward and we should look at what is happening in Germany and to what extent it works.

I turn now to the issue of stamp duty and the surcharge. I understand that it was introduced to slow down growth in the buy-to-let market, but its operation has consequences for the wider property market. The surcharge is slowing down the market, particularly here in London. We all know that when the market in property slows down in the United Kingdom, it always starts in London and then it radiates out. How we affect the property market in London can undermine confidence nationally, so I think that we should reconsider that surcharge. People are caught in a trap when buying and selling. If you buy a house, having not sold your existing house, you end up with the house you are purchasing being treated as your second home for stamp duty purposes.

In a Daily Telegraph article, Sam Meadows put it this way:

“An additional 3pc surcharge on second properties was introduced last year as a measure aimed to slow the growth of buy-to-let. But it quickly drew criticism, including from those home-movers who buy their next property before selling their current one. Under a ‘replacement main residence’ rule, people who do this who must pay the higher stamp duty rate upfront. They are then eligible for a refund if they sell their former home within three years. Government figures, released today, reveal HMRC has had to give refunds on 10,700 transactions at an average cost of £11,869. Lucy Brennan, a partner at accountancy firm Saffery Champness, said having to make a payment of that size could prevent families from moving on to their ideal property”.

There is every evidence that the system is damaging the property market, and the Government should look at it in the Budget, even as early as next week.

This reminds me of the import deposit scheme that, as some Members may remember, was introduced in the 1969 Labour Budget, nearly 50 years ago. Under that scheme, importers had to pay an additional sum of money to the Revenue—what was then Customs and Excise. The idea behind that was to restrain, to some extent, the increasing level of imports into the United Kingdom. The effect was that the Government were effectively gathering in money, which was then offset when it later had to be repaid. Firms were set up to buy the liability to pay the import deposit levy, so importers ended up paying interest on the money they were borrowing to pay the scheme. Of course, they got the money back in the end, over a six-month period, I think. So, stamp duty is operating in very much the same way—being collected, then being given back.

There are two ways to deal with that. If the Treasury does not want to spend a lot of money, it could extend the time to sell property from three to five years. That is one way to deal with it; on the other hand, the more expensive—but preferable—option would be to cease upfront payments of the surcharge.

Finally, I want to move to the question of landlords and their payment of tax to HMRC. I want to pray in aid to a report produced by the London Borough of Newham, which I got hold of this week. I do not know if the Minister has seen the report, but I advise Treasury officials to dig it out. It states:

“the primary purpose of Newham’s licensing scheme is foremost to protect tenants. We have shown that private rented sector licensing has ancillary benefits in ensuring landlords meet their tax responsibilities both to local and central government … Through the data collated by our private rented sector licensing regime, we have been able to assist HMRC in assessing tax compliance by landlords. It is our understanding that a significant number of Newham’s landlords are of interest to HMRC, where there are discrepancies between declared income and our records. Based on research Newham conducted, which was independently evaluated by the Institute for Public Policy Research (IPPR), we estimated that the amount of undeclared tax by landlords in London alone back in 2014 could be as much as £183.1 million.

So, Newham is stating a figure of nearly £200 million in London alone, and the Treasury is stating £590 million nationally. I think that £590 million is a gross under- estimation of revenue lost because HMRC does not have the resources to follow up in the way that Newham Council can in the case of private landlords.

The report then states:

“Newham emailed all licensed landlords in partnership with HMRC shortly after introducing the scheme, advising landlords how they could get their tax affairs up to date. As a result, it is our understanding that a number of landlords on our register voluntarily disclosed previously undeclared rental income. Newham has also provided HMRC with the details of all registered landlords in the borough. It is our understanding that this uncovered a significant number of landlords who may not be declaring their income”.

Why do the Government not promote this idea of a registration scheme for landlords nationally, for every borough, whereby they could link up with HMRC and increase the tax take from private landlords? I was put on to this by a chap called Mr Gunston, who wrote to me last week. I had asked the noble Lord, Lord Bourne, a question on this matter. Mr Gunston said:

“Clearly Lord Bourne had not read the report by the London Borough of Newham that of the 26,254 landlords on its Houses in Multiple Occupation register, some 13,000 had not registered with HMRC for tax self-assessment. You will be aware that it is a requirement for all landlords receiving annual rent of £2,500 or above to register for tax self-assessment with HM Revenue and Customs. Given that this is just one London Borough, if replicated across London and the remainder of England, it would suggest that there is a significant problem of landlord tax evasion and the loss of significant tax revenues. In an era of limited government finances and a large government debt, clearly Lord Bourne needs to take the issue of tax evasion and tax avoidance more seriously”.

I was not expecting the noble Lord, Lord Bourne, to give me an immediate answer at the time, but I think he may wish to refer to my modest contribution to the debate.

All I am saying is that there is a lot more money to collect out there. When we hear of reductions in resources available to HMRC, that fact is worrying. The Government should act on the basis of information I have provided, which I would have thought HMRC is aware of but unable to deal with at the present time.

Photo of Lord Leigh of Hurley Lord Leigh of Hurley Conservative 8:27, 15 November 2017

My Lords, this year I served on the Finance Bill Sub-Committee of the Select Committee on Economic Affairs. I congratulate the noble Lords, Lord Turnbull and Lord Hollick, and my colleagues on the committee on, and thank the special advisers who helped us so ably for, the report’s publication. I draw your Lordships’ attention to my interest in the register, not least as a member of the Institute of Chartered Accountants in England and Wales and, by something of a fluke, as a member of the Chartered Institute of Taxation. It is something of a fluke because, somehow or other, I passed the exams in 1985, to the great surprise of my teachers and colleagues at the time. Taxation post-1985 has been a bit of a mystery to me, but I have some expertise of it pre-1985.

None the less, it is particularly gratifying to debate the report at Second Reading of the Finance Bill. I served on the sub-committee when we investigated taxation on LLPs, and was very disheartened to find that none of the many recommendations we made were adopted by the previous Chancellor. I am extremely encouraged that the current Chancellor has taken a completely different approach, and is clearly listening to submissions and reports, such as the one made by your Lordships’ committee. However, it was disappointing that the Statement of 13 July thanked many members of the public, and others, for contributions, but did not recognise our report. I think we can take it that they were listening.

As considerable time and effort goes into these reports and, equally important, members of the public give their valuable time making written and oral representations, I was pleased to learn that so much of the report is being implemented in the Finance Bill and subsequent announcements. We heard from a number of witnesses worried about the impact on their businesses and from professional advisers who pointed out that their clients were simply not prepared to tackle digitalisation. As the noble Lord, Lord Turnbull, said, it was eye-opening to learn how many taxpayers and members of the public were either digitally excluded or referred to as “assisted digital”, who would need some sort of help to interact digitally with the Government. This ranged from about 30% of micro-businesses to 45% of the adult population.

Our report welcomed the Chancellor’s announcement of a delay, but made the point that it did not go far enough to allow proper testing in pilot areas, as had been planned. Overall, it must be right to encourage all businesses to go digital, but it is not clear to me that this will close the tax gap as contended, although I of course recognise that the tax gap under this Government is the lowest ever. However, the behavioural assumptions made imply that errors, when corrected, will always be in the Exchequer’s favour. I am not sure this is the case. The Chartered Institute of Taxation surveyed its members; 41% thought that the changes would have little impact on the level of their clients’ errors, and nearly 40% considered that they would increase errors, which could of course lead to a loss of Treasury revenue.

The Association of Accounting Technicians, another institute very much at the front end of helping business, was concerned that time-consuming and costly quarterly reporting requirements would result in businesses turning to the black economy. I was persuaded that the impact of quarterly reporting could substantially increase the error rate. HM Treasury and HMRC seem confident that their estimates will hold up, but I am not convinced that the pilot studies have been as extensive or as deep as they could be.

I can see that where businesses use spreadsheets rather than software, particularly where they have partial exemptions, converting the output figures into the VAT return will be a challenge. There is still time to be flexible as the regulations are not scheduled to be laid before Parliament before spring 2018, so one can only hope that HMRC is listening and talking to those affected.

I can tell noble Lords that quarterly accounting is causing great concern in the business community. To make corporate tax quarterly returns effective will need considerable work, not least in assessing accruals, identifying provisions and computating capital allowances. Is this really a constructive use of entrepreneurs’ time?

Once again, I add my voice to those who plead for tax simplification. I do not have it but there are 640-odd pages.

Photo of Lord Leigh of Hurley Lord Leigh of Hurley Conservative

I thank the noble Lord. That does not seem very far along the road of tax simplification. Businesses will have all sorts of challenges when MTD hits them. I hope the Government will listen to the Office of Tax Simplification, which, in its submissions to us, was clear that its opinions had not really had an impact.

It has to be said that, despite my earlier comments, HM Treasury really has by and large listened to those with genuine concerns. One can only hope that it continues in this direction of travel.

I turn my attention to a couple of other areas in the Finance Bill, not the report. I will not touch on inheritance tax, but it was extremely interesting to hear some radical views on it. I would welcome further debate in this House on taxation. It is a little disappointing that so few of your Lordships are able to speak tonight, but although we are not allowed to comment on rates, allowances and so forth, I would have thought we were allowed to comment on structures and new and radical ideas. I hope the usual channels might permit debate on this subject at a later date.

The area I will talk about relates to Clauses 48 to 59, which deal with fulfilment of third-country goods coming in to the UK via online marketplaces. This follows measures in last year’s Budget and gives HMRC much greater powers, as my noble friend Lord Bates said. I first raised this issue in an Oral Question in December 2015 and have, together with my noble friend Lord Lucas, continued to address it in a number of speeches in your Lordships’ House. Accordingly, I welcome these important clauses, but I am concerned that much greater work needs to be done. Only last month I asked in a Written Question whether HMRC obtains data on the amount of goods that non-UK sellers of the likes of Amazon and eBay import into the UK and, if so, whether HMRC reconciles that data with declared sales. The answer from my noble friend the Minister—I join my noble friend Lord Wakeham in congratulating him on his performance here and in other roles—was a little disappointing as it, shall we say, avoided, if not evaded, the question.

I have also asked whether the Government will treat Amazon as a supply chain for VAT purposes and was very encouraged by that answer. I remind my noble friend that there is nothing more irritating to UK retailers than seeing overseas, third-party, non-EU companies sell their goods into the UK without VAT, effectively undercutting UK retailers.

I do not think the importance of these clauses has been recognised. I urge my noble friend to read the written submissions by Richard Allen of to the Public Accounts Committee hearing on 13 September this year. It states that the VAT registration numbers of traders on Amazon are either not being displayed, or, where they are, could be completely bogus. As a result, customs authorities are unable to police abuse. Consequently, it could be that certain internet retailers will not and should not be regarded as fit and proper fulfilment operators as defined by these clauses. There are many examples of certain internet retailers being aware of abuse and just not acting.

To the extent that Clauses 48 to 59 give HMRC great power, they are very welcome. I do not agree with the Chartered Institute of Taxation; the fact that they could be guilty of committing a criminal offence is a good thing. My concern is that there is evidence of HMRC not using its existing powers and this has now become a national issue. The level of VAT loss here is estimated by HM Treasury to be in the region of £1 billion to £1.5 billion—huge numbers. So, yes, HMRC needs to be properly resourced to pursue this, but the third parties must also share the costs as the ones who are benefiting. They now bear joint and several liability, and action is the only way to tackle this huge loss of VAT and damage to regular UK traders. It is vital that HMRC acts on these clauses and related ones, and a number of us in this House and in the other place will monitor this issue with further Written Questions and debates.

I want finally to address the clauses covering the EIS, or enterprise investment scheme, and VCTs, or venture capital trusts. The clauses in the Finance Bill largely implement previously announced changes to the scheme, but their very existence implies that the Treasury is committed to the VCT scheme and EIS. It was pleasing to see that there were no substantial changes, negatively, in the Finance Bill and I make a plea for no more dramatic changes to the VCT and EIS legislation over the next few weeks, or even days. We of course await the patient capital review, but it is clear that VCT funding is of a longer term, typically seven years, and plugs the finance gap of equity funding in the £2 million to £10 million range. Some excellent research has been done by the venture capital trust association which shows an increase in the number jobs created by VCT investees. I am aware that the Treasury does not like to see a loss of revenue, which occurs when investment is made in such businesses, but to maintain the UK’s position as one of the leading countries for start-up businesses, it would be a great shame if either of these incentives for new business and growing businesses was in any way hampered.

There are many other areas in the Bill which merit further discussion, such as tax avoidance and interest deduction by companies, but I think I have said enough for the moment and eagerly look forward to the proposals in the Budget in a couple of weeks’ time, which I hope will enable your Lordships’ Economic Affairs Finance Bill Sub-Committee to meet again and take on new and fresh challenges.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy) 8:39, 15 November 2017

My Lords, it has been a short debate—I am beginning to think that debates are in inverse size to a Bill, as is perhaps true in this case—but a fascinating one, and I am glad to be the first of the wind-up speakers. When the Minister opened this discussion of the Bill, he concentrated first on praising the Government for their action on tax avoidance. If he feels that action has been adequate, he will have heard within the context of this debate some additional ideas from the noble Lords, Lord Campbell-Savours and Lord Leigh of Hurley, and others, and I recommend that perhaps he follow some of the coverage of the Paradise papers. The tax avoidance community is constantly ingenious and always finds yet another loophole. It is about time that the Government looked again at the possibility of a general anti-avoidance rule rather than living as we do at the moment with a general anti-abuse rule, which limits our capacity to shut down many such operations in the early stages of their development. We are constantly playing a catch-up game with the specialists, and it seems that most people in this House would like to see that process change dramatically. I am not saying that there has not been improvement—there has been some closing of loopholes—but there is an incredibly long way to go before we get a grip on this, mostly because too much money is involved, which is a constant incentive to others always to look for yet another way to get around the latest measure that HMRC has managed to put forward.

On non-doms, I think that there is some frustration around the Bill in that all of us feel that each person should pay their fair share of taxes. The noble Lord, Lord Bates, was quite eloquent in saying that, and there has been a tightening up of non-dom regulation, but through a potential loophole with offshore taxes it almost feels as though there has been tightening with one hand and loosening with the other. This is an issue which for the purposes of public trust alone should really be taken off the table. It is important that the Government get a real grip of issues such as non-dom status. Taxpayers really feel the pressure of being honest in paying their taxes and feel that others can always find some mechanism. Although they may be using non-dom status and not tax avoidance in the conventional sense, it feels exactly the same if you are a member of the public and there are opportunities to continue to exploit that kind of positioning and designation.

The noble Lord, Lord Turnbull, took on the core issue in this Bill. I join others in praising the work of the Economic Affairs sub-committee, because I have sat on it in the past and know how closely it follows the legislation and the detailed evidence it takes. The noble Lord, Lord Wakeham, praised the Minister—I think that we all join in that praise—but his sting in the tail was that this was a pretty critical report, and it certainly is. However, it is a very important one. Both the noble Lord, Lord Turnbull, and the noble Lord, Lord Leigh, acknowledged that the Government had shifted in part in response to the issues that had been raised in the report and the protests that the business community has raised much more widely about the whole process of making tax digital, but frankly we are looking at small companies. There is no meaningful rationale for making this process mandatory on smaller entities. It should be a voluntary process. These companies live reasonably hand to mouth and take a great deal of risk. I was looking at a report from the Federation of Small Businesses that identifies the fact that small businesses already carry costs of more than £3,500 a year to meet tax and regulation requirements; adding more to that process every year, putting the additional stresses on companies of quarterly and digital reporting, really undermines a group of companies that we absolutely require as the backbone of our economy. Their growth is critical and taking any measure that hinders that growth is, frankly, retrograde.

I had not realised until I looked at this that a significant minority still complete their returns manually. Asking them to make this step into digital reporting is surely a challenge: many lack the IT skills and the digital technology, but it is also an issue of time. Anyone who has worked in a small business—I have had one of my own—knows that the day is not an eight or nine-hour working day but a 12 or 15 or 16-hour working day. Frankly, we should look at ways to lift pressure off these companies, not add pressure to them. I really do not understand why HMRC does not recognise the realities of life as a small company and turn this into a voluntary scheme rather than a mandatory scheme. Additional time—an additional year—is welcome, but it really does not meet the need in this instance.

One of the most striking comments in the report, at least from an administrative perspective, is that the benefit to HMRC “remains opaque”. If we do not have administrative benefits, then putting an additional administrative burden on small businesses seems even more extraordinary, frankly, in this area. I make one last comment: I hope that HMRC will take on board the challenge that small businesses are finding in meeting what it obviously thinks should be one of the easier tasks, which is going digital for tax purposes and reporting quarterly. We are looking, with Brexit, at a reality where border clearance for exports to the EU as part of a supply chain will require an extraordinary level of paperwork. If the only relief for that burden—the only way of reducing that cost and that friction—is to go digital, which is the suggestion we hear from the Government, it is going to be a near impossible challenge for small businesses, with huge consequences for them and the way they work.

I very much hope that HMRC will take on board and learn from this experience that this is not an easy process, has significant costs for small businesses and undermines their capacity to grow and thrive. A lesson needs to be learned. I join others in saying that one of the most interesting parts of the debate has been some of the suggestions that have come forward for different ways of looking at tax. We do not have those debates very often in this House and there are surely some exciting opportunities to rethink the way we levy taxation. We keep building on what is essentially a Victorian system and a Victorian set of assumptions yet we are going into the 21st century, into a digital world with a fourth Industrial Revolution coming. It seems to me that that requires really fundamental rethinking; it is both an opportunity and a challenge and I am sure that, within this House, there is an expertise that could very much contribute to it.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Treasury) 8:47, 15 November 2017

My Lords, this has been an excellent debate. It has centred on a financial Bill which scarcely gripped the nation—save those aspects of it which were junked in the early stages, straight after the Budget, with all the controversy which surrounded that. It had a pretty poor parentage in those terms and of course this reception has helped to indicate that the Bill is not a terribly important one in the nation’s affairs. The other aspect of it, with regard to timing, is that we are considering the Bill, as the other place has been considering the Bill in the last couple of weeks, within a week or so of the next Budget and the next financial Bill—so it is not surprising that the Bill has not provoked a great deal of controversy, nor a great deal of approval.

Because of this I feel free to concentrate first on the Economic Affairs Finance Bill Sub-Committee report and congratulate the noble Lord, Lord Turnbull, on his introduction, which made the issue so clear, and the noble Lord, Lord Wakeham, who contributed as a member of that committee. It seems to me that the report puts forward a very clear position, which the Government ought to take cognisance of.

In two concurrent sentences, the report makes its case clear. It says:

“The digitalisation of tax administration in a way that assists taxpayers is … to be welcomed”.

The Official Opposition endorse that wholeheartedly, but it is a question of how we make that work. The next sentence in the report states:

“Where the Government is wrong”,

is in their timetable. We certainly endorse that point as well. Of course, the Government have moved a little on the timetable—but not, we think, far enough.

We put forward an amendment in the other place proposing that there should be more time for people to adjust to the demands of responding to the Inland Revenue than the Government are providing at present. The reason is quite clear. It is thought that 61% of those who are self-employed—2 million people—will struggle with the process of compliance. They may struggle with that process for other reasons as well, because people do not enthuse about paying tax. But what is reflected here is that these people will have the greatest difficulty in meeting the standard requirements of the Inland Revenue for the submission of their returns. We therefore cannot possibly demand that they respond without adequate preparation.

I very much enjoyed the contribution of my noble friend Lord Campbell-Savours, along with the fact that the noble Lord, Lord Leigh, gave him some support. I imagine that they would differ a great deal on detail, but my noble friend identified that there is at least a significant case for the Inland Revenue, and for the Government, to concentrate rather more on wealth than income. We all know how wealth has accumulated in recent years, and how limited the range of that wealth is in the numbers of people who have benefited from it. So it is right that we look at the issues introduced by my noble friend Lord Campbell-Savours, particularly on inheritance tax. I would certainly welcome it if this House engaged in a series of debates on issues as fundamental as this.

If this was the sole area of our criticism of the Bill, it would be serious enough—but we have criticisms of many other features as well. The Minister in his opening speech, which we all enjoyed as we always do when he contributes, made some surprising statements about the strength of the economy. Some responsible opinion, such as that of the Institute for Public Policy Research, has actually said that the economy is broken and “needs fundamental reform”. It is only Ministers who can glibly say that all is well in the world; it seems to me that there is a great deal that needs to be reformed.

The Government persist in lower taxation for the rich and for big companies, while hitting the income of those less well-off very hard—even to the point where those who depend on universal credit are meant to sustain themselves, devoid of any resources from welfare, until the issues are sorted out. If that continues to happen as we run into the Christmas period, and if people find themselves unable to meet their bills and therefore get ejected from their homes, this Government will not know what has hit them.

This is nothing to do with taxation but on one occasion, I found that one of my great boyhood heroes when I was a young cricketer, the wonderful spin bowler from the West Indies, Sonny Ramadhin, happened to be a publican in the town that I represented. The brewery decided that it wanted to take possession of the pub and throw him out on Christmas Eve. How very thoughtful. How very considerate. This was a man who had won the plaudits of nations—I say “nations” because the British approved of him as much as the West Indians in the tests. He was thrown out on Christmas Eve. You should have seen how that stirred the people of Oldham. Corrective action was taken quite quickly. If this Government are heading for that kind of conduct over the next month or so because of the way in which they are implementing universal credit, I warn them that they are in for a very difficult time indeed.

The Government present what I think is a somewhat rosy picture of the strength of the Inland Revenue. From the very first day that they came to office, we were anxious about cuts in HMRC. Within a year it was quite clear that the cuts there were the same as those in other departments. It did not matter how much we told the Government that they were in fact cutting jobs and people who were bringing in revenue, they persisted. They persisted all through the days of austerity. The Minister is trying to pretend to me now that in fact the Inland Revenue is quite able to reach its requirements. One of the things that is going on in the Inland Revenue at present is a very significant cut in the number of offices and the creation of the regions. I have no doubt that that fits some grand plan somewhere that will be efficient in the long run, but in the short term and where we now want the Inland Revenue to be effective, it is bound to have deleterious effects.

Do the Government understand the diversity of UK society at present? How can they talk well about an economy when people under 30 have very little hope of matching the living standards of their parents? Housing is far too expensive for them to be part of the property-owning democracy—except for the favoured few—and rents rocket up in the private sector for all the reasons we know only too well. Over this period of austerity, wages and salaries have been frozen, particularly in the public sector, and jobs have often been replaced by zero-hours contracts and jobs which bear no resemblance to the public sector jobs that they have replaced.

People should envisage what it means to work for an employer who has such power in relation to the so-called contract that you actually have not got with him. He can tell you to sling your hook, basically, at a moment’s notice. If we have that kind of society, the Government cannot boast about full employment too much if quite a percentage of jobs fit into this pattern. Without wage growth, what is happening? At present, inflation is dashing past the rise in wages and people are being impoverished by that fact. Housing inflation, in particular, means that there is no hope for so many who would otherwise aspire to own their home.

That is about people who live in our country and try to cope within this flourishing economy—but the national statistics bear out the limitations of this Government as far as the economy is concerned. We have the lowest productivity in the G7. Germans are able to produce three times as much as we can in the same unit of time. The trade imbalance is still increasing and Britain is finding it very difficult to make its way. There are great disparities between incomes and wealth in London and the south-east, and the rest of England and the rest of the United Kingdom—Wales, Scotland and Northern Ireland. These are all indications of an economy about which the Minister, far from being complacent, ought to be concerned. He should demonstrate how the Government are analysing their response to these great issues.

Under it all of course is the great uncertainty of Brexit. We all recognise that Brexit is a massive challenge for the Government, but the Minister must recognise that the time delay that is going on before any definition of progress with regard to the negotiations means that of course business confidence is very severely affected.

This is a finance Bill whose only merit is that it will in fact be supplanted by another one in the very near future.

Photo of Lord Bates Lord Bates The Minister of State, Department for International Development 9:00, 15 November 2017

My Lords, I thank all noble Lords for their contributions in this short but very helpful debate, which was significantly strengthened, as many noble Lords said, by the excellent report on making tax digital prepared by the sub-committee, which I again pay tribute to. There were, rightly, some concerns about consultation and the steps which have been taken. My noble friend Lord Wakeham, although very generous towards me personally, then lulled me into a false sense of security by reminding me of the limitations of consultation. As he was saying that, I was thinking back to a text that used to be above the kitchen steps in my parents’ home, from Proverbs 16, verse 18:

“Pride cometh before a fall”.

I certainly do not want to go down that route, but we in your Lordships’ House can be proud of the contribution that it has made in terms of improving the way in which these measures have been introduced.

In no particular order, I will try to address some of the issues in the time that I have available. The noble Baroness, Lady Kramer, asked how we expect the process of making tax digital to bring in more tax. In 2014-15, more than £3.5 billion was lost due to mistakes in VAT tax returns alone, and the Office for Budget Responsibility will certify costings for the revenue programme and how yields from taxation are forecast to increase in the course of the Budget.

The noble Baroness also said that not enough action was being taken to dissuade tax avoiders. Clause 65 and Schedule 16 introduce a new penalty for any person who enables the use of tax avoidance arrangements which are later defeated by HMRC. Tax avoiders face significant financial costs when HMRC defeats them, but those who enable them to bear little risk; they gain financially as their clients foot the bill. One of the purposes of this legislation is to tackle that injustice.

The noble Baroness asked whether there would be a general anti-avoidance rule rather than a general anti-abuse rule. The Government are legislating on the general anti-abuse rule, drawing on the recommendations of an independent expert study group led by Graham Aaronson QC. It is robustly founded. The Bill takes forward a number of specific and significant provisions that will tackle areas of tax avoidance.

My noble friend Lord Leigh referred to some of the issues raised by the committee’s report, and raised concerns regarding the administrative burden of making tax digital for VAT. As VAT already requires quarterly digital returns, no business will need to provide information to HMRC more regularly that it does now; nor will it need to provide extra information.

The noble Baroness, Lady Kramer, mentioned the difficulties of filling in VAT tax returns, and I can empathise with that, having filled them in myself. It is a tortuous process. But digitisation of this, we believe, can actually make tax recording simpler in the long term by making use of the technology that is available.

My noble friend Lord Leigh also asked about spreadsheets. Businesses can continue to use spreadsheets as part of maintaining digital records and performing tax calculations to meet making tax digital requirements. Any business choosing to keep its digital records in performing tax calculations using spreadsheets must ensure that it meets the making tax digital requirements, including automatically sending the required digital updates and other recording to HMRC. As part of the pilot started earlier this year, HMRC has already received the first update from someone keeping their records on a spreadsheet. It is also worth saying, more generally, that the Government will not force the system on anyone who cannot handle it—a point which the noble Lord, Lord Turnbull, rightly led on. Indeed, 3 million businesses under the VAT threshold will be able to move forward towards making tax digital at a pace that works for them. Even larger businesses will be asked to use making tax digital for VAT only from 2019.

My noble friend also brought the attention of the House to Clauses 48 to 59 on fulfilment houses and the previous Finance Act 2016 provision that allows HMRC to make online marketplaces jointly and severally liable for the unpaid VAT of their non-EU sellers. Together, this package of measures, first announced in the Budget, is expected to raise £875 million by 2021.

I, too, enjoyed the contribution of the noble Lord, Lord Campbell-Savours; it was a thoughtful contribution on the wider issue of taxation. It was nice to see cross-party consensus between him and my noble friend Lord Leigh. The noble Lord, Lord Davies, also mentioned talking more about the principles of taxation, and I agree.

The noble Lord asked whether inheritance tax should be paid by the beneficiary rather than from the estate. This would be a very large-scale reform, with significant impacts across a wide range of situations and would need careful consideration. He raises the example of Germany. That was not one that I was aware of, but I am keen to look at that. The Government keep all taxes under review, and I will ensure that the noble Lord’s remarks are brought to the attention of my colleagues in the Treasury.

The noble Lord, Lord Turnbull, asked when a revised impact assessment will be published. It will be released shortly, following the Budget. He also asked whether there will be at least one year of systems testing before introduction. The making tax digital for VAT pilot will commence by the end of the year, starting with small-scale technical testing, followed by a wider live pilot in the spring. This will allow for more than a year of testing before any businesses are mandated to use the system, and testing of all MTD elements and processes. I hope he will feel that that is a step towards what he was asking for.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

The Minister referred to the specific issue of inheritance tax, but what about stamp duty?

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

Fair enough. I thought he had dealt with me—that was all. Forgive me.

Photo of Lord Bates Lord Bates The Minister of State, Department for International Development

I would never be so pompous as to pretend that I should deal with the noble Lord, but I shall certainly be responding to his comments. I said earlier that because I have not been able to sort my papers into chronological order, I was just taking them as they came, but I will certainly come to his point on stamp duty.

The noble Lord, Lord Turnbull, asked about businesses that have difficulty in engaging digitally. The noble Baroness, Lady Kramer, also referred to this. The Government have been clear from the outset that those businesses which are unable to go digital will not be required to do so. We are legislating to exempt taxpayers who cannot engage digitally. All businesses currently digitally exempt for VAT will continue to be so under MTD. This will be based on existing VAT online filing exemptions, which stakeholders have recognised as a sensible definition.

I turn now to the question raised by the noble Lord, Lord Campbell-Savours, about whether the stamp duty surcharge was harming the market and should be reformed. He referenced a report by Newham Council. I have not seen it, but I will certainly make sure that it is drawn to colleagues’ attention. Since 1 April 2016, higher rates of stamp duty have been charged on purchases of additional residential properties, such as buy-to-let. This is part of the Government’s commitment to supporting home ownership, alongside other measures on both the supply and demand side of the market. This Government keep all taxes under review.

I thank the noble Lord for his contribution. He asked specifically about Newham, which is an issue that the Government take seriously. HMRC reduced the tax gap in 2015-16 to an historic low. On the time-specific matter raised by the noble Lord, I shall be happy to write to him and endeavour to answer his questions on the Newham experience. That applies to all other points raised by noble Lords which I may not get the chance to cover in my remarks.

My noble friend Lord Wakeham asked about the wider lessons for HMRC’s consultation arrangements. I was almost tempted to say that I would be delighted to invite him back to his former parish at the Treasury where he could meet us and talk about the consultation exercise. I think that that would be a very good thing, so I put it on the record, and my colleagues will ensure that that happens. He talked about the informal conversations and people talking through particular problems. That would be helpful. There are standard guidelines on how consultations are now supposed to be undertaken in operation across government, and there are areas where that could be improved.

The decision to move to a single, annual autumn Budget allows more time to consult before tax changes take effect. The Government have made significant commitments to improve tax policy-making since 2010, and we remain committed to them. On a point raised by the noble Lord, Lord Davies, I recognise that the Bill is a very substantial piece. He rather unkindly referred to parts of it being somehow dealt with in the wash-up before the general election.

There is a general point here. I know that there is always a tension: do you make changes explicit in law, and therefore run the risk of criticism for producing a Bill of 664 pages, or do you establish general principles? Because that often leads to contested cases going through the courts, trying to determine what was in the mind of the legislators, we recognised that we should try to be explicit about our intentions wherever possible. We are introducing some significant changes, and 70% of the clauses in this Finance Bill were announced prior to the spring Budget in 2017 and consulted on extensively. Effectively, we will continue that discussion, including through the publication of draft legislation. There are over 390 pages of draft legislation: 98 clauses and 22 schedules were published for technical consultation in December 2016. Further draft legislation was published for technical consultation in January 2017: seven clauses and six schedules in over 200 pages of new draft legislation.

The noble Lord, Lord Leigh, asked about the Office of Tax Simplification, which was established by the Government last year, and placed on a statutory footing. It is dedicated to reducing tax compliance burdens on both businesses and individual taxpayers. It investigates where the tax system is overly complex and advises government on how to reduce that complexity.

I am conscious that time is moving on and that I have addressed a number of the points raised by noble Lords, though not all. A number of the points were worthy of more detailed consideration so, with the leave of the House, I undertake to reflect on the debate, which has been thoughtful and of a very high quality, and to write, perhaps following the Budget, to update colleagues as we go forward. With that, I commend the Bill to the House and beg that the House grant this Bill a Second Reading—or words to that effect.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time, and passed.