Clause 72 and schedule 26 limit lease premium relief available to a trader or intermediate landlord where leases are of more than 50 years’ duration. The measure will take effect if the lease is granted on or after 1 April 2013 for companies, or 6 April 2013 for individuals or partnerships. The change follows a recommendation from the Office of Tax Simplification that the lease premium relief regime was an area that could benefit from simplification. The aim is to simplify  the regime so that relief will no longer be available to a trader or an intermediate landlord who pays a lease premium on a lease that is deemed to be short because of the operation of rule 1. I will not go into the technicalities, as I am sure the Minister will explain those to the Committee.

The Chartered Institute of Taxation in its response to the informal consultation on the proposal pointed out that the documents relating to the rationale behind the change are not easy to locate. It said:

“There is no link to the text of the consultation on the HM Treasury or HM Revenue and Customs website.”

However, it continued:

“The justification for such a change is that, in HMRC’s experience, it is generally only used—where the landlord is not within the charge—to tax the time involved in applying the provision for both HMRC and tax agents and apparent disputes that can arise between landlord and tenant in the application of those rules.”

It went on to state:

“We do not believe the reasons for the proposed change have been fully explained and appear to indicate an element of discrimination between tax-exempt and taxable landlords for which we see no obvious rationale. To set the proposed change in context it would be helpful to have further information on all leases with tax exempt landlords (number and value), and the number and value of leases which take advantage of the relief to reduce the effective duration of the lease for tax. It would also be of assistance to know what proportion of the latter are considered abusive and why such abuse cannot be tackled with existing legislation.”

The tax information and impact note clearly indicates that the measure is one of simplification, with operational savings expected to HMRC and the Valuation Office Agency. It says:

“Initial HMRC operational impact is estimated to be less than £2 million resource savings. Includes a saving of 25 per cent of Valuation Office Agency specialist technical team resource.”

Will the Minister clarify whether, as the CIOT suggested, concerns have been expressed about potential abuse of the scheme? If so, what action has been taken to address those concerns? Does the Minister have the information and the figures that the CIOT requested in its consultation response? The tax information and impact note suggests that the number of businesses affected is unknown. It is difficult to know how effective a simplifying measure will be when no information is available about how many businesses it might affect.