Clause 34 - Meaning of “residential property developer”

Part of Finance (No. 2) Bill – in a Public Bill Committee at 4:15 pm on 5 January 2022.

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Photo of Lucy Frazer Lucy Frazer The Financial Secretary to the Treasury 4:15, 5 January 2022

There are quite a lot of points to address. I will deal with those that are easy to deal with orally, and I will get back to the hon. Member for Ealing North in writing on some of the more detailed points he raised. I am very grateful to him and to the hon. Member for Glasgow Central for welcoming our decision on affordable housing and the not-for-profit sector. We had obviously thought about that very carefully. I think it is the right decision, and I am pleased that it has cross-party support. I welcome, as does the hon. Member for Ealing North, the work that has already been done to reduce cladding by that sector.

The hon. Member for Ealing North asked why we will not extend the definition beyond that to not-for-profit providers. It is because this measure relates to a charge when people have made a significant profit of more than £25 million. He also asked why we need flexibility to come back, by way of regulation, and change the definitions. The definitions are based on legislation from the devolved Administrations, and if those definitions change, we need the flexibility to change them here as well.

The hon. Gentleman also asked about different scenarios for disposals of land. He will know that, when coming up with this policy, we thought carefully about what should and should not fall within it, and what was right to fall within it. We excluded build-to-rent because it is a very different sector in which profits are earned in a different manner at a different time. It was not comparable to the build-to-sell sector. He posited a number of scenarios in which commercial entities might change their activities in order not to pay this charge over the period of time but may ultimately sell properties in due course. We of course considered the possibility that people might change arrangements in order not to pay the tax, but we took the view, having discussed the issue, that significant change in commercial behaviour or business models in order simply to avoid the tax would be unlikely. I will get back to him on some of his specific points.

The hon. Gentleman also made a point about student accommodation, which I will answer from a broad perspective. Those who build properties and are able to pay the levy, because they have an income of more than £25 million, are subject to the tax. It is on house sales of a particular kind, where the purpose of the sale is essentially a sale of a property but it so happens that some other services are provided at the same time. It is essentially competing with the build-to-sell sector, which is why it is included in the legislation.

The hon. Member for Glasgow Central asked whether we would keep in touch with the Scottish Government, which we of course will and are very happy to. She asked what happens when people provide good services, for example in the affordable housing sector, but are profit making. I want to reiterate that the levy will catch significant property developers earning in excess of £25 million—it is that type of company that will be caught by the levy. We will of course keep everything under review, and the same point relates to the point that the hon. Member for Glasgow Central made about student accommodation. This is about big providers that are selling property to individuals, rather than renting the accommodation in short order.

I am really pleased that the hon. Member for Glasgow Central recognised the successful work that HMRC has done over the course of the pandemic in pretty short order. The furlough scheme and all the grants have largely been administered by HMRC, and it has done a tremendous job, delivering at pace. She is right to point out that HMRC has been stretched at times and that there is a significant amount of work coming its way in due course with the social care levy, but I want to reassure her that it is fully aware that this legislation is coming down the path and that it will be ready to deliver. For those reasons, I commend the clauses to the Committee.