Question (this day) again proposed,That the clause stand part of the Bill.

Just before we broke, I referred to the issue of top-up payments not being taxable. I had just begun to speak on that topic but had indicated that I wanted to put a couple of questions to the Minister with regard to a previous discussion around clause 11. Clause 14 states:

“A top-up payment is not to be treated as income for any purpose of the Tax Acts.”

Will the Minister explain whether there is any crossover between our discussion on clause 11, particularly with regard to income tax and corporation tax? Is there any other reason why clause 14 is necessary? Perhaps he could also supply any additional information about corporation tax, about which I questioned him earlier.

It is good to see you back in the Chair, Mr Robertson.

Clause 14 states that a top-up payment received under the scheme is not taxable in the hands of the charity or CASC that receives it. It has been included to bring the scheme into line with gift aid. Gift aid payments are repayments of tax, so are not themselves taxable. Grants are often taxable. As the top-up payments under this scheme are technically grants and not tax relief, without this clause, they might be taxable. The clause clarifies that they are to be treated in the same way as gift aid payments.

I hope that helps the hon. Lady. For extra clarity, I can clear up one point on corporation tax. If the top-up payment is used by the charity for non-charitable purposes, it would be subject to corporation tax. If it is used wholly for charitable or other qualifying purposes, it would be exempt.

I thank the Minister for that answer but, once again, it leaves me slightly more confused and concerned. I would have understood if it had simply been the case that the top-up payment was not connected to corporation tax. However, did the Minister not suggest earlier that any top-up payments that were not used for charitable purposes would potentially have to be repaid to HMRC? How can they be repayable if they are not used for charitable purposes and also count in relation to corporation tax?

The intention is that there would not be such a top-up payment. Ideally, if the scheme functions as it should, there should not be a top-up payment where it is planned to be used by the charity for non-charitable purposes. The whole purpose of the top-up payments is to support charities in their charitable activities. The purpose of clarifying that in clause 14 is to ensure that, in cases where a top-up payment is made, it is clear that it would be subject to corporation tax if it were applied in such a manner. That should not actually happen; it is worth making that point for the sake of clarity.

I genuinely had not expected the clause to be controversial. It seemed necessary and sensible to have something that outlined that the top-up payment was not to be treated as income for purposes of the tax Acts. However, given what the Minister has said, I am left with some confusion. Either a top-up payment that is used for non-charitable purposes has to be repaid because it has not been used for the purpose for which it was intended, or it is eligible to be counted as income for corporation tax. The two things do not logically sit side by side. If the Minister wants to intervene to give further information, that would be helpful. If he is not able to do that at the moment, perhaps he can let us know in due course. I am certainly not suggesting that the clause should not stand part of the Bill.

I can perhaps give a little more clarity. The way that this will work is that top-up payments are not subject to tax, however they are spent. The reason why it applies is that, if it turns out, once the top-up payment has been made, that it was wrongly used for non-charitable purposes—intentionally or otherwise—HMRC will be able to reclaim all or a portion of that top-up payment.

I absolutely understand that and I thought that we had got to that point earlier in the day. I am still struggling to understand how that relates to the corporation tax element.

If it is okay with the hon. Lady, I will happily come back to her to clarify that.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15 ordered to stand part of the Bill.