(Except clauses 1, 4, 8, 189 and 209, schedules 1, 23 and 33 and certain new clauses and new schedules) - Clause 195 - Anti-forestalling charge to value added tax

Part of Finance Bill – in a Public Bill Committee at 9:45 am on 21 June 2012.

Alert me about debates like this

Photo of David Gauke David Gauke The Exchequer Secretary 9:45, 21 June 2012

To be fair, the hon. Lady acknowledged that the distinction can be a cause of dispute. It can distort behaviour, with people trying to arrange a change to a property in such a way that it is considered an alteration rather than a repair. Disputes about the distinction can cause difficulties for HMRC and taxpayers. It is an anomaly, and it is right that we have sought to address it.

I will address some of the questions that have been asked. On the funding of the listed places of worship scheme, we made it clear when the Budget was announced that we would expand the scheme so that churches would not be affected by the change in policy. We made an estimate at the time based on a Church report that suggested that the cost would be in the region of £5 million. After the Budget, we had further discussions with the Church of England, which led on the matter on behalf  of other Churches. It became clear that the cost to the Churches had been underestimated, but we had always made it clear that we would compensate them. We had a constructive dialogue with the Churches, and the Chancellor and I met the Bishop of London and others on a couple of occasions to discuss the matter. Given the new evidence that was presented to us, we expanded the listed places of worship scheme in a way that I think the Church of England and other Churches are happy with. Our engagement on that point has been constructive.

As far as the estimate for the construction industry is concerned, we published a tax information impact note that showed the overall assessment of the impact on the industry as a whole. That tax information and impact note will be updated, but we believe that the impact on the overall construction industry will be marginal. A concern was raised about the transition, and the point was made that plans often take a number of years. We want to be as flexible as possible on projects that were under way before the Budget. The consultation paper made it clear that we want the transitional rules to provide as much flexibility as possible. I hope that reassures the general heritage industry. I have had a number of meetings with the Heritage Alliance, English Heritage and a broad coalition of interested groups on the matter, so there has been strong engagement.

A number of hon. Members have mentioned self-storage. On revenue and the effect on business, I refer the Committee to the summary of impacts set out in the consultation paper. Some 250 VAT-registered self-storage businesses that do not opt to tax their supplies will be affected. Additionally, any unregistered suppliers of self-storage will have to register as a result of the measure. The number of those businesses is not known but is estimated to be about 50. An unknown number of unregistered businesses, businesses that make exempt supplies and charities that are unable to reclaim the VAT charged on self-storage will be affected.

One-off compliance costs have been considered and are expected to be negligible in total. An estimated 300 businesses are expected to incur costs from familiarisation with the new guidance, system changes, repricing and additional bookkeeping, but those costs are all expected to be small. Ongoing annual costs have been considered for the estimated 50 businesses that will have to register, and those costs, again, are expected to be negligible in total.

I am grateful for the letter from my hon. Friend the Member for Poole, and I know he has asked for a meeting about the concerns he has raised. I have not yet responded to him in writing, but, if he would accept my response here, I would be delighted to meet him. I am grateful to him for raising that point.

We will have an opportunity to return to these matters on the Floor of the House, but I hope the Committee appreciates that the clause and schedule 26 will be important in preventing forestalling in response to the upcoming VAT liability change. The provisions in schedule 26 are a fair and proportionate response to the threat of forestalling, and the changes we make on Report will ensure that the anti-forestalling elements will remain effective.