Clause 59 - Relocation relief

Finance Bill – in a Public Bill Committee at 9:30 am on 10th June 2003.

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Question proposed, That the clause stand part of the Bill.

Photo of Mark Prisk Mark Prisk Shadow Paymaster General

This is another clause needed because of the earlier decision by the Government to scrap subsale relief on a general basis. Under the clause, relocation relief has been promoted. That operates on the basis that where an employer will offer to purchase an employee's current residence to enable staff to relocate, that transaction would be exempt from charge. The idea is not to inhibit the transferral of employees around the country, particularly where employers are willing to pay for the move and believe it to be expedient. That is a very important part of the principle of the free movement of labour.

There have been several representations on the matter. The Law Society has pointed out that the clause applies only to a narrow number of relocation companies, a point on which the Chief Secretary touched. I draw the Committee's attention to subsection (5). I will not read it, given the time that we have left. A number of companies supply services

similar to those of relocation companies, but they would not satisfy the definition as set out in subsection (5). I shall cite a couple of examples.

Some house builders specialise in retirement homes. They outsource their part-exchange schemes so that what really occurs is not technically a part exchange. As a result of house builders not wishing to tie up resources in part-exchange transactions, the outsourcing company would act in the same way as a relocation company that falls within the remit of the clause. However, the relocation would not occur as a result of a change of employment, and the relief would not therefore be available.

A second example is the situation in which companies become involved as what are known in the market as chain breakers, in which a chain of transactions is in danger of collapsing without the intervention of such enterprises. That intermediary activity, which under the present regime is embraced by the general subsale relief, is a very important service. It provides liquidity to the market and helps with mobility. Will the Chief Secretary explain the basis for defining the relief as he has, and does he accept that modern commercial practice, which he says is the basis of the reform, should in fact take account of those different organisations?

Photo of Michael Jack Michael Jack Conservative, Fylde

My hon. Friend rightly pointed out that the Chief Secretary had alluded to the clause as the place at which the Government might have something more specific to say about so-called third-party exchange mechanisms. McCarthy and Stone, which is a major provider of private sheltered accommodation, uses precisely such a mechanism. The third party, while not becoming the owner of the part-exchange property, effectively completes the process up to the exchange of contracts, then acts as an intermediary before completion of the sale. Obviously, that has several advantages, in that it facilitates the sale and breaks chains, as my hon. Friend said. It also takes from an elderly person, for whom a move may be a traumatic enough experience at the best of times, the difficulty of disposing of their property.

As I understand it, the way in which the new tax will operate will give two bites of the tax cherry. If that type of property sale is not exempted from the proposals, one lot of duty will be payable by the third-party company and another lot will be payable once completion occurs. That was not the Government's intention, if my understanding is correct. Given the Chief Secretary's helpful allusion to a possible concession on Report, I press him to be entirely clear about the Government's intentions.

Photo of Mr John Burnett Mr John Burnett Liberal Democrat, Torridge and West Devon

I am grateful to Ms Linda Wilson, who is a partner of Wards Solicitors, and to the Law Society and other organisations for raising the matter, which boils down to the narrow definition of relocation company in clause 59(5). I hope that the Chief Secretary, having heard the arguments put by other members of the Committee, will consider that it would be wise to make the definition less restrictive.

Not only do chain-breaking schemes help the smooth running of the housing market but other

companies that work in conjunction with house builders that specialise in retirement homes outsource their part-exchange schemes to clients and others. Generally, that is still referred to as part exchange, even though the two companies involved are not connected. In fact, it is a substitute for the house builder itself becoming involved in the process. I hope that we can have a more generous definition of a relocation company than the narrow definition in clause 59(5).

Photo of Mr Paul Boateng Mr Paul Boateng Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

As has already been discussed, a general form of successive subsale transfer relief will not be carried forward in the stamp duty land tax. This clause is the first of three clauses intended to mitigate the abolition of subsale relief in specific circumstances. The relief in clause 59 will provide a useful benefit for companies that specialise in relocation services for employees and for employers who need to move key staff at short notice. It will also mean that employees will not have to worry about the sale of their house at what may be a stressful time for them.

Several people, as well as some hon. Members, have queried why the clause covers only relocation of employment and not other forms of relocation. In particular, the Government have received representations from organisations providing relocation services to older people moving into retirement accommodation. The hon. Member for Torridge and West Devon referred to chain-breaking companies, which buy land from individuals where the alternative would be a chain of property purchases falling apart.

We have already discussed companies that provide services to older people, which relates to clauses 58 and 59. Some house builders may not be able to make a cash payment to their older clients to cover the difference in price between the retirement property and the previous dwelling, and they may out source the acquisition of the previous dwelling to another company that specialises in acquiring and moving on such property. Because there is no exchange, such a situation is not covered by clause 58, but it is covered by clause 59—our solutions encompass clauses 58 and 59.

I can provide some comfort to the hon. Members who have raised the issue of chain-breaking companies. I can confirm that we will consult with bodies in the sector and will table appropriate amendments to clause 59 before the implementation of the modernised regime to ensure that chain-breaking companies can operate without a double charge to stamp duty land tax. A relief for this specific point would assist liquidity in the housing market, which we all agree is desirable. The Office of the Deputy Prime Minister has already issued a paper making the promotion of chain-breaking companies a Government policy.

In the light of that explanation, I hope that Members will give the clause a fair wind.

Question put and agreed to.

Clause 59 ordered to stand part of the Bill.