I beg to move amendment 6, in schedule 4, page 41, line 25, at end add—
‘13. The Treasury shall publish a report in the 2011 Budget detailing the projected revenue implications of the provisions of this Schedule for the five financial years after commencement.’.
The meat of the matter within schedule 4 is specifically related to the whole point of the changes. Currently, the REIT arrangements take the yield of tax on the cash dividend of payment, and yet the change in the clause seeks to allow companies to make that dividend payment in stock. My questions for the Minister are pretty obvious. Will she tell the Committee what the current tax yield is from the cash dividend taxation regime on REITs? Perhaps she could give us the figures for the last available financial year. Will she give us a sense of what we are talking about here? As I understand it, allowing stock dividend arrangements means that the tax on those changes will only be crystallised at the point at which the stock is then sold or disposed of. Under the current arrangements, there is a revenue yield to the Exchequer at the point at which the dividend is distributed, which is not the case under the stock dividend route.
Amendment 6 calls on the Treasury to produce a report in the 2011 Budget, detailing the projected revenue implications of the provision for the next five financial years after the commencement of the Act. We feel that that would be helpful in ensuring that we keep track of the implications of this particular change for the Exchequer. Moreover, an estimate of the volume that is likely to be created by the stock dividend route would be useful. I hope that officials will not be recommending the introduction of such a change without having some idea of where the industry might go. I would be grateful if the Minister could clarify those points.
Let me specifically address amendment 6. The presumption behind it is that the tax treatment of stock dividends will be different from that of cash dividends. That is not correct. Stock dividends will be treated in exactly the same way as the cash distributions, so there will be no loss to the Exchequer. In other words, the amendment proposing a report that charts the plus or minus for revenue is unnecessary because the change will have no revenue impact; it simply gives REITs more flexibility on how they make their distribution within their existing distribution requirement.
With regard to the baseline and the report that the hon. Gentleman wants to see showing the amount either way, that information is not available because there is such a wide range of investors involved that they would not specifically identify their PID income in a way that would allow us to collect the information centrally. We know that REITs have become the main tax vehicle for many of the companies involved in that area, so we can see the overall activity within the sector through REITs, but specific investor-level tax revenue implications are less clear. The answer to his underlying question about the difference to the Exchequer is that there is no difference.
My understanding was that although the yield for the Exchequer would be the same in the long run, in the short run it depends very much on the point at which the stocks are disposed of. Only at that point will the tax be paid and the yield gained for the Exchequer. Given that we are in a spending review period in which every single year of revenue yield matters for the profiling of public expenditure, it seems important to ascertain whether there will be a deferral of revenue, with money not coming into the Treasury as quickly as it would do in a cash dividend circumstance. I would be surprised if, as the Minister says, no stock dividend is paid at the point of issuing. That was not my understanding at all.
I reiterate that there will be no Exchequer loss or gain as a result of clause 10 or schedule 4. There will not be that temporal issue with revenues that the hon. Gentleman suggests there might be. There will be no deferral of tax, which is why there is no difference. I hope that that has answered his question—[ Interruption. ] There is no doubt that it has absolutely answered his question, although he might not understand why.
I am interested to hear the Minister’s points, because although I of course accept that there will be no loss of yield in the long run, I am not sure that her response is sufficient to answer the point I was trying to make about the annual, year-by-year profiling of the revenues and why, if tax will be deferred until the point at which the stock is disposed, that will not affect yield. It might be because of the gaping hole in HMRC’s knowledge about the total yield, which hopefully she will join me in saying is unacceptable. To have no idea about what the cash dividend yield is for the Treasury really is not up to snuff, and I hope that her Department will tighten its awareness of what the yield is from that area. That might be why there is a lack of information.
The hon. Gentleman is following a red herring—[Hon. Members: “That was this morning.”] I have obviously missed a more fun part of the Committee’s proceedings. He is heading down a route that I do not think is productive. I can be very clear with him; he is labouring under the misunderstanding that we will treat stock dividends differently from cash dividends, but we will not. The tax on them will not be deferred, as he has in his mind, so I can correct him on that. Hopefully he can understand, as a result, that because tax will be paid on the issue of the stock dividends, just as it is treated as a cash dividend, there will be no revenue difference. I hope that that provides him with the final reassurance that he needs.
I have no choice but to take the Minister’s crystal clear assertions on that point. I had a different understanding of the arrangement but she has disabused me of that.
Perhaps we should return to the issue after I have had chance to consult some serious brains on the matter. I still think it is not acceptable that the Treasury does not know the revenue yield. It is important that, for each of these particular large tax relief arrangements, we have some estimate of what is happening in terms of revenue yields. However, the Minister has persuaded me for the time being so, at this stage, I beg to ask leave to withdraw the amendment.