Finance Bill — House of Commons, 2017-10-31
Topic: Macroeconomics
Melvyn John Stride (Conservative, Centre-right): Following our vigorous and constructive debate during the Committee of the whole House last month, I welcome the opportunity to reiterate the importance of the changes we are making to the taxation of termination payments today. In doing so, I thank the hon. Members for Oxford East (Anneliese Dodds), for Lewisham West and Penge (Ellie Reeves) and for Aberdeen North (Kirsty Blackman) and acknowledge their contributions Before I respond to some of the detailed points raised, let me begin by briefly reiterating the objectives of the changes we are making. As I have outlined previously, the current rules on the taxation of termination payments can be unclear and complicated. Unfortunately, this complexity has led to a small minority of individuals and employers—particularly those with the most generous pay-offs—seeking to manipulate the rules to avoid paying the tax that is owed. They do so by characterising large pay-offs as termination payments rather than earnings, so that they qualify for the £30,000 tax exemption and an unlimited employee national insurance contributions exemption. As Members on both sides of the House have agreed, this situation is clearly unfair for the vast majority of employees, who are unable to manipulate their payments in this way. The purpose of this clause is to tighten and clarify the tax treatment of termination payments to make the rules fairer and prevent manipulation As we have heard, amendments 1 and 2 would remove the power to reduce the £30,000 tax exemption threshold for termination payments by regulations. As I have said several times in this House, the Government have no intention of reducing this tax-free amount, despite the best efforts of Labour Members to suggest otherwise. Let me assure the House again: any reduction in the threshold would be subject to a statutory instrument and the affirmative procedure, so the House would have to approve any such proposal. The House rejected this amendment in Committee of the whole House, and I urge it to do so again Amendment 3 would exempt from taxation all termination payments for injured feelings. As the House heard earlier this month, this amendment would present further opportunities for those seeking to manipulate the system by opening a large loophole for payments to be routinely reclassified on account of an injury to feelings, without any medical evidence, simply to pay no tax. This is hard to prove or disprove, and it would be very difficult for HMRC to regulate. In any case, payments for injured feelings will of course continue to qualify for the £30,000 tax exemption like any other normal termination payment. The House wisely rejected this amendment earlier this month, and I urge it to do so again The changes being made by clause 5 are a fair and proportionate way to close a loophole in the rules that has unfortunately been open to manipulation in the past. The Government have repeatedly shown that many of the concerns raised by Labour Members are unfounded —and, frankly, give the appearance, at least, of misconstruing an important tax avoidance measure as some kind of attack on those losing their jobs. This politicking is unworthy of the Opposition. I have heard no new arguments or evidence today to convince me of the need to reconsider this clause. I therefore urge the House to reject the amendment Question put, That the amendment be made.