Clause 31 - Provision in connection with the Dormant Assets Act 2022Clause 31

Finance (No. 2) Bill – in a Public Bill Committee at 2:30 pm on 14 December 2021.

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Question proposed, That the clause stand part of the Bill.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

With this it will be convenient to discuss that schedule 6 be the Sixth schedule to the Bill.

Photo of Lucy Frazer Lucy Frazer The Financial Secretary to the Treasury

The Committee will be disappointed to learn that this is probably the last clause that we will deal with today. It introduces schedule 6, which supports the expansion of the dormant assets scheme to a wider range of assets. The clause ensures that where an asset is transferred into the dormant asset scheme and an individual later makes a successful claim to the ownership of that asset, they are in the same position for capital gains tax purposes that they would have been in without the scheme.

The dormant asset scheme enables funds from dormant bank and building society accounts to be channelled towards social and environmental initiatives. The scheme allows dormant funds to be unlocked for good causes, while protecting the original asset owner’s legal right to reclaim the amount that would have been paid to them had a transfer into the scheme not occurred.

In 2021, following a consultation, the Government announced their intention to expand the scheme to include assets from the pensions, insurance, investments and securities sectors. The process of transferring the assets into the scheme could, in certain cases, qualify as a disposal for CGT purposes, resulting in neither a gain nor a loss. As the asset owner cannot be located and does not know that the transfer has occurred, it is not appropriate or feasible for the tax to be paid by the individual at the point of transfer to the scheme, or for a notice of a loss to be made. The change made by the scheme addresses that by ensuring that a CGT charge arises only where a person comes forward to claim the asset. That ensures that the individual remains in the same position for tax purposes that they would have been in had the asset not been transferred into the dormant asset scheme.

Where the asset had previously been held in an individual savings account, changes made by the schedule ensure that no income or CGT arises when the asset is reclaimed. That ensures that savers in ISAs are not disadvantaged by their accounts being transferred into the scheme. The scheme also updates references in the existing legislation to ensure that it reflects the widest scheme created by the Dormant Assets Bill.

The schedule will commence only on the making of a Treasury order, because the Dormant Assets Bill is not yet law. The intention is to lay the necessary commencement order before Parliament when that Bill becomes law. For that reason, the schedule contains time-limited powers that allow the Treasury to make changes by secondary legislation if changes to the Dormant Assets Bill result in additional tax issues. The Government believe that the provisions strike the right balance between supporting good causes and taxpayer fairness.

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury)

As we have heard, clause 31 and schedule 6 concern the Dormant Assets Bill. The changes broadly ensure that individuals remain in the same position for tax purposes as they would have done had the assets not been transferred into the dormant assets scheme. Overall, we do not oppose the measure, but we are aware that the Chartered Institute of Taxation has concerns about the availability of accessible guidance to those making a claim under the dormant assets scheme who may be unaware of the tax consequences of their actions. Will the Minister clarify when guidance will be issued?

Photo of Lucy Frazer Lucy Frazer The Financial Secretary to the Treasury

I am grateful for the hon. Member’s indication that the Opposition will not oppose this measure. HMRC does generally provide guidance, and I am very happy to update the hon. Member on any guidance on this issue.

Question put and agreed to.

Clause 31 accordingly ordered to stand part of the Bill.

Schedule 6 agreed to.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

I wish all Members a merry Christmas and a happy and healthy new year, and I extend that to the Clerks and officials and everybody involved with the Bill.

Ordered, That further consideration be now adjourned—(Alan Mak.)

Adjourned till Wednesday 5 January at half-past Three o’clock.

Written evidence reported to the House

FB01 Low Incomes Tax Reform Group (LITRG) (re: Clause 10 Increase of normal minimum pension age)

FB02 Chartered Institute of Taxation (CIOT) (Clause 23 Capital gains tax: disposal of UK land etc.)

FB03 Chartered Institute of Taxation (CIOT) (Clause 31 and Schedule 6 Dormant Assets)

FB04 Chartered Institute of Taxation (CIOT) (Part 2 (clauses 32-52) Residential Property Developer Tax)

FB05 Chartered Institute of Taxation (CIOT) (Clauses 9-11; Clause 98 Employment Taxes)

FB06 The Institute of Chartered Accountants in England and Wales (ICAEW) (Clause 94 and Schedule 15 (Notification of uncertain tax treatments by large businesses))

FB07 Chartered Institute of Taxation (CIOT) (clauses 16-22 – Creative reliefs)

FB08 Association of British Insurers (ABI)

FB09 British Property Federation (re: Residential Property Developer Tax in Part 2 of the Bill)

FB10 Scottish Widows