Finance Bill — House of Commons, 2017-10-31
Topic: Macroeconomics
Stella Judith Creasy (Labour, Centre-left): As it is Halloween, I rise to give the Minister a fright, because if he thinks he is going to get away without properly examining new clause 2 and the benefits that it could bring to our country and British business, he is in for a trick-or-treat moment. There are certainly ghosts that haunt our politics—[Interruption.] I am disappointed to see you being so slow, Mr Deputy Speaker—[Interruption.] That is certainly very spooky As I said, there are ghosts that haunt our politics, so I start my speech by putting on record my thanks to the former Member for Tatton, George Osborne, for inspiring new clause 2. Indeed, I noted that the Minister referred to his work, too. These were the words of the former Member for Tatton in 2015 when the then Government brought in the first rules around tax and non-doms: "It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax."—[Official Report, 8 July 2015; Vol. 598, c. 325.] By using those words, the former Chancellor raised two important issues: first, the fairness of our taxation system and, secondly, how it extends to foreign ownership. He was absolutely right to introduce those measures, but what we are talking about today is the necessary and inevitable conclusion of that debate: what we do when people raise issues about fairness and foreign ownership. The new clause answers that call because, frankly, it is not fair that British businesses have to pay corporation tax on their capital gains when they sell commercial properties, but overseas businesses trading in the UK in UK-based property do not It is not fair that we are one of the few countries in the world to treat its businesses in this way and let foreign companies off the hook—all those real estate investors who some might feel donate so much else to some in this country, but who do not pay their taxes. As the previous Chancellor argued, people can put property into an offshore company to avoid tax If the Minister’s main objection to the new clause is the way in which I have described the domicile of these people, he ought to think again. Certainly, he ought to do as I did today and google the term "tax efficient Jersey UK real estate", because when he does and he sees the advice being offered to non-resident companies, I suspect he will find it galling. He will find companies including BNP Paribas Real Estate, Ogier, Bedell Cristin and Hawksford boasting about how UK real estate investment trusts based in Jersey but listed on the international stock exchange do not pay the same rates of stamp duty as those resident in the UK, and do not pay capital gains tax. Indeed, the International Stock Exchange itself states: "we have pragmatic listing requirements for this product" That simply means that the businesses involved get to avoid the same charges that our British businesses have to pay. We as British taxpayers should be asking why any company is using such a model—why such companies are given these listings and are able to buy and sell UK property in this way—because it is very hard to see what the justification is, and why we make it so easy to exploit this loophole when there is tax on residential property sales, but not on commercial properties The former Chancellor boasted in 2015 that making non-UK-based people pay capital gains tax on their residential property sales would raise £1.5 billion over the course of this Parliament. The purpose of the new clause is to tell us just how much closing this loophole would raise, and just how much these companies are making through such behaviour Sadly, because the Minister was so determined to get through his speech so quickly, I did not hear the number he came up with. I certainly find it striking that HMRC does not know how much money is missing, but in the spirit of this cross-party measure, let me offer the House some of my own figures The British Property Federation says that there is about £871 billion of commercial real estate in the UK, which represents 10% of our nation’s entire wealth. That is a hugely important market in its own right, but how we buy and sell commercial property also affects our residential property market, as it has an impact on the price of land. For those of us who represent constituencies where house prices are exorbitant, to say the least, tackling the overheating in our property market would be a very noble thing to do. I believe that we would get support for that from both sides of the House. We know that about 20% of commercial real estate is sold every year, and that it was worth an eye-watering £115 billion in 2015—that is the figure the taxman knows about. We also know that about 30% of commercial property in the UK is held in these offshore trusts and companies. For those who are fans of "Countdown" and want to see how I have done my homework, I have done my sums assuming an 8% increase as the long-term trend rate for commercial property prices. Working on that assumption, if about 20% of that property is sold and the current 19% rate of corporation tax is used, there would be about £11 billion of taxable gains every year. It is therefore not unrealistic to expect that around £6 billion of taxation could be collected.