Clause
16Gaming
machines Question
proposed, That the clause stand part ofthe
Bill.
John
Healey: I have explained the purpose of the clause,
referring to it in my remarks on clause 9. Its material effect is to
align section 23 of the Value Added Tax Act 1994 with schedule 9 to
that Act and therefore give full legal effect to a situation that has
been in place administratively since 6 December.
The clause also allows us to
amend the meaning of “games of chance” by Treasury order.
We will do that later this year to ensure that both section 23 and
schedule 9 take account of the definition of a “game of
chance” that is contained in the Gambling Act. We have further
work to do both with the industry and internally on pinning down that
definition. That is why we propose to do it by Treasury order later
this year, rather than now. I commend the clause to the
Committee.
Mr.
Mark Francois (Rayleigh) (Con): May I also welcome you to
the Chair, Mr. O’Hara? I look forward to serving under your
beneficent guidance and that of your fellow Chairmen as we plough our
way through the Bill over the next few weeks.
I also take this opportunity to
welcome the Economic Secretary to our proceedings, and to congratulate
him on his early promotion to the Government Front Bench. Someone has
clearly smiled upon him and I think we all know who it was.
We have moved on to part 2 of
the Bill, which deals with the VAT regime. When VAT was introduced in
the United Kingdom back in 1973 it was apparently billed as a simple
tax that would be easy to understand and to administer. In the next few
hours, I suspect that the Committee might disagree with that original
assertion. The clause
deals with VAT and gaming machines. It represents a relatively gentle
introduction to this part of the Bill and is relatively
non-controversial. The Financial Secretary helpfully wrote to members
of the Committee on 8 May, outlining the Government’s
rationale behind the clause, which seeks, in essence, to update the
definition of gaming machines for VAT purposes and the related
definition of a “game of chance”. Anyone embarking on a
political career might have their own definition of that. I have one question to put to
the Minister at this juncture. The final full paragraph of the
Financial Secretary’s letter mentions that the updated
definition of a “game of chance” is intended to comply
with the definition in the Gambling Act. In itself, that seems to be a
sensible provision. However, the letter also refers to a nuance
concerning the fact that the Gambling Act does not apply in Northern
Ireland. As the Financial Secretary said, confirmation is awaited that
this will not cause any problems in using the definition in tax law.
Before we allow the clause to stand part of the Bill, will the Minister
expand a little on that point? Will he explain, at least roughly, when
the Government expect that work to be complete? When do they expect
that confirmation to be forthcoming so that the order can be
issued.
Mr.
Breed: I believe that this measure is a useful
clarification. Much of the work will be done in the next year or so,
before the next Budget. We look forward to the complexities of that. In
the meantime, the proposal is sensible to ensure that the definitions
and so on are comparable.
John
Healey: The hon. Member for Rayleigh(Mr.
Francois) describes this provision as a gentle introduction to the VAT
section of the Finance Bill. It was not designed as such; it was
designed for the fairly narrow purpose of dealing with the definition
of a “game of chance”. The simple answer to his direct
question is that the Gambling Act does not apply to Northern Ireland,
which has its own legislation in that area, although tax legislation
does. We propose to draw heavily on the definition of a “game of
chance” in the Gambling Act. We have more work to do before we
can confirm that, particularly checking with the Northern Ireland
Office whether or not there is any inconsistency or potential problem
that we have not yet
foreseen. In such
circumstances, rushing to confirm the definition when we do not need to
at this point does not seem sensible. We will do that by Treasury order
later this year. Essentially, we need to complete some technical work
in order to do so with a certainty and confidence that means we are
much less likely to have to return to the Committee and to the House to
put right any technical deficiencies that we could have avoided. That
is the purpose of the timetabling in those stages. I hope that that
gives the hon. Gentleman the reassurance that he
seeks. Question put
and agreed
to. Clause 16
ordered to stand part of the
Bill.
Clause
17Buildings
and
land Question
proposed, That the clause stand part ofthe
Bill.
Mr.
Francois: I take the opportunity to welcome the Paymaster
General to our debate on this part of the
Bill. In essence
clause 17 is enabling, designed to permit the redrafting of schedule 10
of the Value Added Tax Act 1994, which deals specifically with the
taxation of buildings and land. As the explanatory notes to clause 17
of the Bill point
out: “The VAT
option to tax land and buildings legislation in Schedule 10 to the VAT
Act 1994 is one of the most complex parts of the VAT
legislation”. The eyes of
the hon. Member for Wolverhampton, South-West (Rob Marris) are
positively lighting up as he reaches for the explanatory notes. I can
see that he is not about to disappoint
us. The chief reason
for this degree of complexity has been the piecemeal addition to
schedule 10 since its introduction, chiefly by means of secondary
legislation usually designed to add anti-avoidance measures to the
original schedule. For instance, as just a small sample of the changes
over the past 12 years or so, we have seen the Value Added Tax
(Buildings and Land) Order 1994, which was the first attempt to tackle
lease-back and similar anti-avoidance schemes. Then, as a further
example, the Value Added Tax (Buildings and Land) Order 1999 closed a
perceived loophole in the earlier anti-avoidance provisions. The Value
Added Tax (Buildings and Land) Order 2004 aimed to head off further
avoidance schemes used by partly exempt businesses, which the Treasury
perceived to be another
loophole. The
accumulation of secondary legislation has made the amended schedule 10
increasingly difficult to interpret in practice, to a point where
HMRC’s partial regulatory impact assessment, which was released
to accompany that proposed rewrite, admitted with admirable
frankness, “Adding
layer upon layer of anti-avoidance provisions on to legislation that
also has to deal with the complexities of English and Scottish land law
has led to complaints about its complexity and virtual
incomprehensibility.” Indeed,
the introduction of the consultation document provided advice that
should perhaps inform the whole of our proceedings, with the
recommendation
that “taxpayers would
benefit from tax law which is clearer and easier to understand, and
HMRC would benefit from being able to explain the law more
easily”. Finding any
member of the Committee who would contend with that would be
difficult. There
appears to be a broad consensus about the need for schedule 10 to be
rewritten. The consultation document, which was issued in December
2005, laid out the general lines along which this would be undertaken.
Moreover, the Paymaster General helpfully wrote to members of the
Committee on5 May, providing copies of the draft Treasury
order that would in effect rewrite the schedule. Members of the
Committee should have had the opportunity at least to glance at that,
although there has not been an opportunity to consult the professional
bodies, because that draft order has only just
emerged. In
particular, I note that the draft order is now designed to come into
force on 1 October 2006. We have a timetable for
implementation.
Mr.
Francois: I will gladly give way to the hon. Gentleman. I
do not know why it has taken him so long to
rise.
Rob
Marris: As the hon. Gentleman knows, I like to be measured
and brief in my comments. I am grateful to him for giving
way. The hon.
Gentleman said that this rewritten schedule 10 had come rather late, on
5 May. It is my understanding that, as he has mentioned, that is a
second draft following the December 2005 draft, and therefore it
appears to me that there has been quite a bit of consultation—4
months’
worth. 9.45
am
Mr.
Francois: For the avoidance of doubt, I was not trying to
be critical of the Treasury. It undertook what I actually think in this
instance was quite a good consultation—I will make a few remarks
about the consultation process shortly. I was not in any way trying to
have a pop at Government Ministers; I was simply making the point that
we now have the draft order but because it has only just come out we
have not had as much time as we would have liked to scrutinise it in
detail. However, I am not knocking the fact that it is based on an
original consultation which came out in December—and which I
think was well conducted. I hope the hon. Gentleman will appreciate
that
nuance.
Rob
Marris: Is the hon. Gentleman revealing to the Committee
that he has not read this draft order rewriting schedule
10?
Mr.
Francois: No, he is not, because he has read it. However,
if there were any problem, I am sure I could rely on the hon. Gentleman
to help. In essence,
the schedule is being rewritten in three areas: first, by outlining the
effect of an option to tax and the exclusions to those options;
secondly, by including the revised and now consolidated anti-avoidance
provisions; and thirdly, by outlining the mechanics of the
administration of the options themselves, including their territorial
scope, timing, revocation, notification and the operation of so-called
permission options. The process also involves the repeal of certain
aspects of the old schedule 10 which have effectively become
time-expired, and which are therefore no longer needed. Therefore, it
is fair to say that in this instance the Government have repealed some
outdated legislation, and we should give them some credit for
that. Therefore, so
far so good, but there are still some general questions that arise
about the proposed rewrite, and I should like to go through them in
turn with the Minister. First, why does this have to be done by order,
instead of being written into primary legislation, which is what
schedule 10 itself is? As an Institute of Indirect Taxation briefing
note pointed
out: “We think
it would be more appropriate for amendment to primary legislation to be
made by primary legislation, not secondary legislation. In the case of
buildings and land, as the draft legislation has already been exposed
for comment it is unclear why it cannot be included in the Finance
Bill, rather than
including the best part of a page of enabling legislation, which will
presumably have no use once the proposed Treasury order has been
approved by the House of Commons.” The Institute of Chartered Accountants
has also expressed reservations about this process. It, too, has argued
that such changes should have been brought about through primary
legislation rather than by means of statutory
instrument.
Mr.
Newmark: I was interested to read that the august
institution, the Chartered Institute of Taxation, also commented. It
said: “We doubt
whether the suggested changes will have any impact on lay persons, so
the only people to benefit are likely to be
advisers.” That is a
concern, because it is important that whatever changes are made are
sufficiently clear, so that lay people can understand the proposed
changes.
Mr.
Francois: I thank my hon. Friend for that point. As I will
discuss, the law has been particularly complex in this area, and that
has been a particular challenge—for instance, for small
businesses. Therefore, my hon. Friend makes a valid point.
I think it is fair to say that
what has been produced is simpler and less complex than what it
replaced, and the Government should be given credit on that point.
However, my specific question to the Minister is: why were they not in
a position to do that by primary legislation? Why did the Government
decide to do this by secondary, rather than primary, legislation? Was
it because the revised schedule was not available in time, perhaps
because the consultation—which I think was well
conducted—only finished at the end of February 2006 so
parliamentary draftsmen could not come up with a proposed new schedule
in time to include it in the Finance Bill when it was published on 7
April? I would accept that point, but I would then ask another
question: could the Government not subsequently have tabled a new
schedule to the Bill in Committee and put the proposal into primary
legislation, rather than relying on an enabling clause and a subsequent
statutory instrument? Is there a technical reason why the Government
have done that? It would be helpful to have an answer from the
Paymaster General when she replies to the
debate.
Stephen
Hesford (Wirral, West) (Lab): I should like to raise the
hon. Gentleman’s quotations from the two institutions with the
VAT and duties sub-committee of the Law Society, which
said: “The Law Society
welcome the proposal to rewrite schedule 10 VATA 1994 in more
accessible language and look forward to reviewing the draft statutory
instrument to give effect to this
proposal.”
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