Clause 76 - Duty to deliver land transaction return

Finance Bill – in a Public Bill Committee at 3:00 pm 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

The clause begins the administration of the new land tax and is therefore an important matter on which we should spend a moment or two. It establishes the duty to deliver land transaction returns. It states:

''In the case of every notifiable transaction the purchaser must deliver a . . . land transaction return''.

The land transaction return, including the self-assessment of liability and the payment of stamp duty land tax, must be delivered to the Revenue

''before the end of the period of 30 days after the effective date of the transaction.''

Subsection (3)—the explanatory notes erroneously refer to subsection (1)—provides that the return must include a self-assessment of liability and

''be accompanied by payment of the amount chargeable.''

Many professional bodies and leading chartered accountants have asked why the payment cannot be made within the same time limit. Why must the payment accompany the return? Taxpayers may want agents to file their returns while paying their tax themselves or they may want to file their returns manually while paying their tax electronically. We have heard a great deal about e-business and e-conveyancing, but their importance has been ignored. The logic of the clause is that the tax will always be payable, but that is clearly incorrect because in some cases a return must be filed in order to claim a relief. Again, the Bill appears to contain a mistake.

There are other concerns. Many leading professionals feel that the 30-day period is too short to complete the form and to pay up, a combination to which I referred earlier. The earlier proposal put out to consultation offered a quarterly return and a payment cycle as an option for business. It was perfectly fair and matched modern commercial practice, but it seems to have vanished. When did the time limit change to 30 days and why did that happen? Does the Chief Secretary accept that professional bodies and leading practitioners, including the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation, KPMG and PricewaterhouseCoopers, have said that the deadline should be reconsidered for the majority of taxpayers? Conservative Members would appreciate it if the Chief Secretary recognised those points and acknowledged them in his remarks.

Photo of George Osborne George Osborne Opposition Whip (Commons), Shadow Minister (Treasury) 3:15 pm, 10th June 2003

I rise for the same reason as my hon. Friend. The clause is the first of a series of clauses that highlight the fiction that stamp duty land tax is connected with the old stamp duty. The compliance system under the old stamp duty was based on documents being sent to the Inland Revenue, where they were stamped. Payment was made once they had been checked and the stamp had been applied. Clause 76 and subsequent clauses contain a whole new method of collecting duty, which is the same collection method used for other taxation because it applies to the transaction rather than to the document. The explanatory notes ominously state that the clause allows stamp duty land tax to use established procedures familiar to many tax practitioners and to the Inland Revenue. It is worth bringing to the Committee's attention the fact that all connections with stamp duty, which exists in name alone because it has nothing to do with duties on stamps, are being severed.

Photo of John Baron John Baron Conservative, Billericay

I support the comments made by my hon. Friend the Member for

Hertford and Stortford (Mr. Prisk) on subsection (3)(b), which lacks flexibility. I should be interested in the Chief Secretary's view on why the Government insist that the return must be accompanied by payment of the amount chargeable. Why can the payment not be made within the same time limit? Small businesses in particular have told me that the requirement will affect them. They would appreciate as much flexibility as possible.

I particularly stress a point that has already been mentioned: a taxpayer may want an agent to file their return but want to pay their own tax, which is becoming increasingly common. I ask the Chief Secretary to address that point directly.

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

This is the first clause dealing with the new administrative scheme and enhanced compliance powers. The modernisation of compliance powers is the cornerstone of the modernisation of stamp duty—I stressed the word ''modernisation'' for the benefit of the hon. Member for Tatton. We are bringing up to date antiquated compliance powers that have lingered on well past their sell-by dates. I shall address his charge in more detail in a moment.

The current stamp duty laws do not contain a recognisable compliance system. I shall give some examples of the problem, which I thought that all hon. Members would recognise. There is currently no obligation to submit documents for stamping, and the Inland Revenue has no powers to force taxpayers to do so. The tax is therefore often referred to as being voluntarily, which was a point made in Committee last week. There is no power to assess under-stated duty. Once a document has been stamped, that is the end, no matter what new information comes to light. The hon. Member for Hertford and Stortford cannot seriously be suggesting that that is right. No person is explicitly liable to pay the tax, so if the Inland Revenue had the power to assess, it would have no one to chase for the tax.

Those weaknesses have been known since 1983, but the hon. Member for Tatton suggests that the legislation is the sinister sign of a novel new tax—in 1983, he was probably the chubby-cheeked terror of the first remove. Nevertheless, even in 1983 the then Conservative Government—no doubt he was a juvenile supporter of the Conservative party even at that early age; he has that precocious feel about him—recognised that something was wrong. The hon. Gentleman's predecessors who had responsibility for such matters asked Lord Keith of Kinkel, a well known and respected law lord who, sadly, is now deceased, to look into the matter to see how the enforcement powers of the Revenue in that respect could be improved. The report made a number of clear recommendations regarding stamp duty among which were obligations to bring documents to stamp, improve information powers, modernise appeal procedures and improve penalties. It took a new Labour Government in 2003—some 20 years later—to introduce all those things. There was an intervening period under Conservative Administrations in which absolutely nothing—zilch—was done.

Photo of Mark Prisk Mark Prisk Shadow Paymaster General

This is a charming and doubtless fascinating walk down memory lane, but none of the

items that the Chief Secretary has mentioned relate to anything referred to by those on the Conservative Benches. Our concerns relate to why the payment has to accompany the return, the 30-day deadline and the other matters that my colleagues have raised. Why give us the history lesson? Just give us the facts.

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

I gave a history lesson because I was provoked into it by the hon. Member for Tatton, who insists that we are talking about a novel and sinister new Labour innovation. We are talking about no such thing.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. Can we calm down a bit? We are going a bit wide. We are discussing the duty to deliver a land transaction return and only that.

Photo of George Osborne George Osborne Opposition Whip (Commons), Shadow Minister (Treasury)

Thank you, Mr. McWilliam. I am happy to have an exchange on our views and opinions in 1983. My opinions were more consistent than the Chief Secretary's.

The clause reveals that the name of the tax is a fiction because it has nothing to do with duties or stamps. Why does the Chief Secretary not admit that fact, say that it is a wholly new tax with a wholly new collection mechanism and be done with it?

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

I make no such admission.

I regard myself as having been drawn back to the detail of the clause, Mr. McWilliam—[Hon. Members: ''Ah!''] No, I am only too happy to do so.

Let us consider some of the points that have been made. I was asked, ''Why 30 days? What happened to the idea of quarterly returns?'' Quarterly returns were first floated as an idea in the consultation document for large groups. In fact, the idea did not much interest those consulted, because they habitually used different legal advisers for each deal and did not see any great benefit in it, so we did not pursue it. That is what consultation is all about. We are accused of not listening. We did listen, and we did not pursue the idea as a result of what we were told. The 30-day limit runs from the completion of the purchase, and, in the great majority of cases, all the money has changed hands by then. There is no justification for a longer time limit. It would cause delay and be costly to the Exchequer.

I was asked, ''Why does the payment have to accompany the form?'' At present, payment is made to the Revenue with the documents for stamping. Requiring the payment to accompany the return continues that practice. Again, there is nothing novel about that. There is no great innovation. It is just common sense. We want to issue the certificate quickly, but if payment is not made with the return, we would have to delay issue until it is made.

For all those reasons, I have no hesitation in commending the clause to the Committee. I hope that it will be given a good wind, because it certainly needs it, not least because the SDLT return will now be made on a form that will be processed centrally. If the return is properly completed and payment is made, the certificate will be issued. Certificates will be rapidly returned to solicitors, thereby allowing title to be transferred in good time. At present, documents must be checked at the time of stamping—that will no

longer be necessary—and the Inland Revenue can make inquiries afterwards. [Interruption.] It is called modernisation, or speeding up the process. Opposition Members ought to welcome it.

In the future, the facility will exist to transfer land electronically. In those cases, it will be possible to shorten yet more the time within which the return is made. All that should be welcome, and I hope that Opposition Members will see the sense of it and not pursue unnecessary and futile objections.

Question put and agreed to.

Clause 76 ordered to stand part of the Bill.

Clauses 77 and 78 ordered to stand part of the Bill.