Changes to periods for delivering returns and paying tax

Finance (No. 3) Bill – in a Public Bill Committee at 2:30 pm on 4th December 2018.

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Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 2:30 pm, 4th December 2018

I beg to move amendment 95, in clause 45, page 29, line 19, at end insert—

“(11) The Chancellor of the Exchequer must lay before the House of Commons a report on any consultation undertaken on the provisions in this section.

(12) A report of the review under subsection (9) must be laid before the House of Commons within two months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to report on any consultation undertaken on the provisions in Clause 45.

Photo of Nadine Dorries Nadine Dorries Conservative, Mid Bedfordshire

With this it will be convenient to discuss the following:

Clause stand part.

New clause 13—Equality impact analysis of provisions of section 45—

‘(1) The Chancellor of the Exchequer must review the equality impact of the provisions in section 45 in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the impact of those provisions on households at different levels of income,

(b) the impact of those provisions on people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the impact of those provisions on the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and

(d) the impact of those provisions on equality in different relevant parts of the United Kingdom and different regions of England.

(3) In this section—

“relevant parts of the United Kingdom” means—

(a) England, and

(b) Northern Ireland;

“regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of Clause 45 on equality in relation to households with different levels of income, people with protected characteristics, the Treasury’s public sector equality duty and on a regional basis.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I am grateful to be serving on this Committee with you in the Chair, Ms Dorries; I do not think I have said that before, and I apologise for that.

This clause reduces the time limit that purchasers have to file an SDLT return and pay the tax due from 30 days after the effective date of the transaction to 14 days. It applies to transactions to purchase land in England and Northern Ireland with an effective date on or after 1 March 2019. Of course, since 2015 there has been a separate land and buildings transaction tax in Scotland, and since earlier this year there has also been a different regime in Wales, where the relevant tax is the land transaction tax.

SDLT was introduced—we were just referring to the relevant Act—in 2003, replacing stamp duty on land transactions. Data from SDLT returns are used by a variety of actors, after being submitted to the Valuation Office Agency, to carry out activities such as valuations for the purposes of council tax and business rates.

This clause obviously has some similarities with clause 14, to the extent that it requires a faster turnaround for the payment of a tax, but clearly in this case it is payment of SDLT rather than capital gains tax. Many of the concerns expressed in relation to that change also apply in this case. They include the question whether taxpayers and, above all, their agents are likely to be sufficiently aware of the new deadline. As a result, with amendment 95, we are asking the Chancellor of the Exchequer to

“lay before the House of Commons a report on any consultation undertaken on the provisions in this section.”

It appears that many taxpayers—some 85% of them, according to HMRC’s figures—already submit their return in line with the proposed new timetable. However, the remaining 15% may have reasons for failing to submit so quickly and those surely should be examined before we embark on this halving of the deadline. Indeed, there appeared to be significant concern among respondents to the consultation about the proposed reduction to the filing and payment window. The consultation response stated:

“Many felt it would be manageable for straightforward transactions—for example most purchases of residential property. Many envisaged difficulties for more complex transactions where the property purchased is subject to leases. Although only a small proportion of reportable transactions are likely to be affected, they amount to approximately 50,000 transactions every year.”

That is clearly a very large number, and those transactions may be particularly concentrated in their effects among certain segments of the population. It is for that reason that new clause 13 would require a full impact assessment of the measure to be undertaken and to consider its impact on people with protected characteristics, people with different incomes and people living in different regions.

I note in the consultation document that, at least at the time of the consultation, there was no HMRC facility for filing and paying SDLT simultaneously. It would be helpful to understand from the Minister whether that facility is coming, as it would surely make the system more efficient.

I was also surprised to see in the consultation document that more than 40% of the returns submitted on paper included errors. That is an incredibly high rate. It would be helpful to know what has been done to deal with that problem, as that system clearly cannot be helping either the taxpayer who has—presumably inadvertently, most of the time—made the error nor the HMRC officer who has to try to rectify it. The very high usage of cheques, which need to be accompanied by the correct 11-figure unique taxpayer reference number also seems almost designed to create an inefficient and error-ridden system.

It was stated in the consultation document that the shorter timescale would be accompanied by a number of other measures to improve the effectiveness of SDLT filing, but it is unclear to me whether and when those new measures are coming into place. One such measure would be requiring all agents to file online, which does seem sensible, but I was intrigued to see in the consultation document the claim that online filing may not be

“reasonably practicable…because of remoteness of location, or on grounds such as religious beliefs.”

It would be helpful if there were more joined-up thinking across Government. For example, it is very difficult for claimants of universal credit to receive it without using the online system. Surely more of them are likely to be affected by living remotely than professional agents involved in property transactions. It would also be useful if the Minister could clarify why religious faith might impact on an individual’s ability to use the internet and why that might be the case for those filing returns for stamp duty and not for those attempting, for example, to claim universal credit.

It was stated in the Government’s response to the consultation that they would look to potentially introduce electronic payment at the same time as the reduction of the reporting period to 14 days, so can the Minister please inform us whether electronic payment will indeed be available when this measure comes into play?

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

Clause 45 makes changes to improve the SDLT filing and payment process. In answer to the hon. Lady’s question about whether we will provide facilities on the site to pay simultaneously, we do not have plans to do so. That is because the online service cannot be combined with Bacs and CHAPS services at present.

The hon. Lady made a more general point about the mistakes that are made in filing. As she knows, we consulted on the information being sought as part of the process, and we will be applying various simplifications as a consequence, most notably around complex commercial lease arrangements. The information that we have hitherto sought in that respect will now no longer be sought. That simplification, and others, should be beneficial in cutting down the mistakes that the hon. Lady referred to.

Currently, the purchaser of land, or the purchaser’s agent, must make a stamp duty land tax return and pay tax due within 30 days of the effective date of the transaction—usually the completion date. The changes made by clause 45 will reduce the time allowed to make an SDLT return and pay the tax due from 30 days after the effective date of transaction to 14 days. That is in line with other initiatives in recent years that bring tax reporting and payment closer to the date of the transaction. The hon. Lady referred, I think, to clause 14 on capital gains tax, where a similar approach has been taken. This is in line with these other initiatives.

The measure will not change liabilities for the purchaser, but will lead to tax being paid earlier. The change applies to purchases of land situated in England and Northern Ireland where the effective date of the transaction is on or after 1 March 2019. This change will directly affect approximately 20,000 businesses, mainly agents, such as licensed conveyancers and solicitors. Each year, this will directly affect fewer than 500 individuals who file their own SDLT returns without using an agent. However, the impact on administrative burdens for businesses is expected to be negligible.

The Government announced the change at autumn statement 2015 and consulted on it, as the hon. Lady described, in 2016. The Government confirmed at autumn Budget 2017 that it would come into effect on 1 March. To help purchasers and agents to comply with the new time limit, HMRC has worked with key representative bodies to agree simplifications to the SDLT return, for example, by reducing the amount of information required. These improvements will be in place when the new time limit begins. The measure will result in a yield of £60 million in 2018-19—the year of implementation—and a small ongoing yield in future years.

Amendment 95 would require a report on any consultation undertaken on the provisions in this section.

Photo of Bambos Charalambous Bambos Charalambous Labour, Enfield, Southgate

What steps has HMRC put in place to make sure that the 20,000 businesses that are going to be affected are properly informed of the change, and know that it is coming?

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

HMRC will, as a matter of course, issue guidance on all major tax changes, and that will be available online. As part of the consultation, as I have outlined, a number of these organisations were consulted in detail, not just about the measures but to make sure that those businesses are ready and appropriately informed.

The amendment is not necessary. I can give the Committee the information it requires now, because it is already in the public domain. The Government published a document on 20 March 2017 in response to the consultation that we published in the autumn of 2016, and we published draft legislation in July 2018 for technical consultation. HMRC also held meetings with stakeholders, which included representative bodies from the property and conveyancing industries. Their views on the information required in the return are reflected in the changes being made to make compliance with the new time limit easier.

New clause 13 would require a review of the equality impact of clause 45. The new clause is not necessary either, because the Government set out in the tax information and impact note published on this change in July 2018. It is not anticipated that there will be any impact on groups with protected characteristics. Clause 45 does not change anyone’s SDLT liability; it just brings a requirement to file a return and pay the tax closer to the date of the transaction. For that reason, direct impacts on different types of households will be negligible, and the type of analysis required by the amendment would not be meaningful.

Regarding other regions of the UK, Land and Property Services in Northern Ireland—an agency of the Department of Finance of the Northern Ireland Executive—was consulted and is content with the measures. The changes will improve the SDLT filing and payment process, and I commend the clause to the Committee.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I am grateful to the Minister for his comments. However, I am sure the whole Committee is looking to the Government to ensure that the payment and reporting systems can be calibrated as soon as possible. Surely, the very high rate of error is a terrible waste of taxpayers’ and, indeed, HMRC’s time. I hope he prioritises sorting that out and having the relevant discussions with the Bacs and CHAPS systems so it can be dealt with.

I underline yet again the contrast, which I note the Minister did not mention, between the Government’s apparent concern with the digital divide when it comes to those who have sufficient resources to purchase a home and are liable for stamp duty, and their concern when it comes to those with very low incomes who try to access social security. None the less, in the light of the Minister’s remarks, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 45 ordered to stand part of the Bill.

Clause 48 ordered to stand part of the Bill.

Clause 49