Finance (No. 2) Bill — House of Lords, 2022-02-22
Topic: Macroeconomics
Frederick Butler (Crossbench, Unknown): My Lords, as an old Treasury man I cannot go all the way with the noble Baroness, Lady Bennett. It is regrettable that we do not have more speakers in this evening’s debate because it is not, as the contributions so far have made clear, as though there is a lack of important economic and, indeed, social issues arising from the Finance Bill Unlike the contributions so far, I will concentrate my remarks on two rather technical aspects of the Finance Bill which were the subject of a report by the Finance Bill Sub-Committee of your Lordships’ House. I was privileged to serve on that sub-committee, as was the noble Baroness, Lady Kramer. One of the aspects covered by the report was—the Minister referred to this—tax basis reform, the effect of which is that self-employed individuals and partnerships are to be taxed on profits arising in a financial year rather than on their own accounting years. The second is uncertain tax treatment, under which large companies will be statutorily required to report to HMRC instances where the company’s view of the likely tax treatment may be different from that of HMRC. I do not need to weary the House by going through the technicalities that these provisions throw up. They are set out clearly in the sub-committee’s report and the government response. I want to just make some general points I particularly wanted to speak in this debate because I did not want the report of the sub-committee to go unnoticed by the House. I believe that the sub-committee provides a useful service, excellently chaired by the noble Lord, Lord Bridges, who could not be here tonight because he is on jury service, and expertly supported by the sub-committee’s clerks and advisers. The sub-committee, in effect, provides an additional channel of communication between representative taxpayer associations and HMRC. That is the basis of an objective assessment by the sub-committee. I say an "additional" channel of communication because there are, and certainly should be, close communications already between HMRC and representative taxpayer associations. I hope that the sub-committee’s work, through the process of taking evidence from both sides, supports this process and provides an independent assessment of the position of both sides Although inevitably the Government have not accepted all the sub-committee’s recommendations, their response has shown some helpful movement on some of them. On the substance of the provisions, I merely want to say that my main concern with both sets of provisions is that their complexity for both HMRC and taxpayers did not seem to have been properly thought through in the first place. Their introduction was not given sufficient time. In fact, the implementation of both sets of proposals has had to be postponed for a year. Even now doubts remain about their practicability and the resources needed to successfully implement them. An additional complication has been Covid, which must have interfered with the preparations for these changes on both the HMRC and taxpayer sides. I am reminded of Denis Healey’s mot that the best time for removing a man’s appendix is not when he is carrying a piano upstairs However, that is not the only cause of difficulty. Some of these proposals could have been surfaced with more notice and been subject to earlier consultation. For example, the proposals for simplifying the tax basis period were first made some eight years ago, yet proposals for implementing it were brought forward at the same time as the changes involved in making tax digital, when they were going to have to be implemented. Also, when the proposals for requiring large companies to report uncertain tax treatment—whatever that may be—were first introduced, those proposals were half-baked, and they are not fully baked even now at the time of their introduction in this Finance Bill We know that the resources of HMRC are already under great pressure and these reforms will add to that pressure, at least in the short term. They will also add costs to the taxpayers affected by them. There is a question mark over whether the return in terms of extra revenue will be worth the resources devoted to them. I hope that all goes well but I have to say that, despite the Government’s response to the sub-committee’s report, I remain uneasy about the ability of both HMRC and businesses to cope The Minister referred to the Government’s aim of achieving a simpler and fairer tax system. That is a worthwhile objective and I have no doubt that they are sincere about it, but I am afraid I do doubt whether, in the shorter term, this will be the result of these measures in the Finance Bill. The difficulties have been exacerbated by the manner in which the Government, in their zeal to close the tax gap, have introduced them with such little notice and consultation. I hope that HMRC will give serious consideration to the general lessons set out in the sub-committee’s report.