Mrs.
Villiers: My hon. Friend makes his point
well.
Rob
Marris: Will the hon. Lady give
way?
Mrs.
Villiers: No, I shall conclude my
remarks.
2.15
pm
Mrs.
Villiers: No, I will now conclude. Government amendment
No. 24 seems like a straightforward tidying up exercise, to which the
Opposition has no objection in
principle.
Julia
Goldsworthy: I will make a couple of short remarks. The
hon. Member for Wolverhampton, South-West makes a valid point. However,
it would have been appropriate to have an amendment to paragraph
9(1)(b) to ensure that the claim was valid. As for the amendment
introduced by the hon. Member for Chipping Barnet, if the Minister is
confident that the payment will be delivered within an appropriate time
scale, clearly she will have no problem in accepting the
amendment.
Rob
Marris: The hon. Member for Falmouth and Camborne (Julia
Goldsworthy) has made a good point. However, I think that the hon.
Member for Chipping Barnet misunderstood my intervention. I will
therefore repeat it, perhaps more fully. The effect of the amendment,
were it to be accepted, would be that if a film production company put
in a claim showing that it was entitled to a tax credit, it would be
entitled to have it paid out within 90 days even if it was not actually
entitled to the tax credit because it had not put in the right
documentation. The company could argue, statutorily, that it had to be
paid because the 90 days was up as per the Act of Parliament. With
respect to the hon. Lady, it would be a complete nonsense if a company
were to be entitled to receive a payment when it had not produced
proper evidence. All members of the Committee would recognise that
companies should provide proper evidence to validate claims to receive
tax
credits.
Ed
Balls: It is obviously important that we implement the
film tax credit as efficiently and professionally as we can. As my
right hon. Friend the Paymaster General said, there is much that we can
learn from the tried and tested model of the research and development
tax credit, which has been successful in its impact and
administration. It is
important to say that we are talking about a tax credit. Therefore, it
depends on the company’s tax position and that is why the claim
needs to be in the company’s return and why repayment will
depend on the broader complexity of those tax
arrangements. John
Hemming (Birmingham, Yardley) (LD): I am having difficulty
in working out the circumstances under which a payment would be made.
As far as I can see, a payment would be made only when a film was
expected to make a loss over its whole lifetime, and on that basis one
would not even make the film. So I find the provision a bit
odd.
Ed
Balls: The hon. Gentleman may have missed some of the
detail of earlier debates—in particular, that this is a payable
tax credit. It can either be taken as a credit against tax take, or as
a direct cash payment in the event that the film makes a loss. It
operates in a similar way to the research and development tax credit,
which is why it is called a payable tax
credit.
John
Hemming: The difference between the film tax credit and
the research and development tax credit is that in this instance we are
calculating the liability to corporation tax on the basis of the
averaged-out income against the expenditure, whereas with research and
development the same assumption is not being
made.
Ed
Balls: It is also the case that we are paying out this tax
credit on the basis of making a British film, rather than for research
and development. They are clearly not analogous; they are different.
One is about making a film, which has a particular tax treatment set
out in schedule 4; the other is about research and development. So I
would not say that they are identical, but the general model has
similarities, and
one similarity is the fact that the film tax credit is payable. If over
the lifetime of the film the company is making a loss year by year, it
can claim the enhanced relief as a
credit. I
make the point to the hon. Member for Chipping Barnet that it is
helpful and constructive to have amendments that are designed to ensure
that the tax system is operated in an effective and efficient way, but
if one is going to table such amendments, and do so in a pointed and
sharp political way, it is important to get them right. The problem
with the amendment is not the wider political shenanigans surrounding
its introduction but the fact that it is badly drafted and flawed and
does not achieve what the hon. Lady intends.
I got the impression from the
hon. Lady’s speech that she expects the clock to start ticking
on the 90-day entitlement when the claim is made; from her speech, one
would have assumed that the claimant would be forgiven for thinking
that the clock started ticking at that point. But in the amendment the
clock starts ticking not when the claim is made but when the
entitlement is established. I should have thought from my experience of
HMRC policy that 90 days is a generous or rather too long a period if
the clock starts from the point when the entitlement is established,
and the amendment appears to be drafted on that basis. We would hope to
get payments out much quicker than 90 days once the
entitlement has been established.
The entitlement needs to be
established promptly, without impediment, but the time that that
process takes depends on the broader issue of the tax return and its
complexity, and the time that it would take to establish that it is not
some sort of complex trade that is being abused for tax-avoidance
purposes. HMRC will take the time that it needs to establish that it is
not tax avoidance and its officials will want to do that as
expeditiously as possible. That is part of their job; they will also
ensure that they do it properly and they will take time to establish
the entitlement. From the point that the entitlement is established, 90
days is too long a period, but that is what the amendment refers to.
The proposal is flawed; it misunderstands what it is trying to achieve
and therefore lets the Revenue off the hook rather than tying it
down. My advice to
the hon. Lady is that if she wants to criticise the Government on the
matter of administration it is important to get the facts right before
tabling an amendment. Being more generous, I would say that one of the
great advantages of this debate is that we can discuss these matters in
a friendly, co-operative way, knowing that we agree on the general
objective, which is to ensure that British films are subsidised in
Britain. If only we had the same unanimity on our goals to reduce child
poverty through the tax credit system; maybe in that respect there
might be a bit more consensus than there has been so
far.
Mrs.
Villiers: I shall start by reassuring the hon. Member for
Wolverhampton, South-West that the amendment does not seek to entitle a
film production company to the film tax credit automatically,
regardless of whether a valid claim is made, because it is inserted in
the last line of paragraph 9. The preceding two paragraphs make it
clear that a valid claim must be established before the last line kicks
in.
I welcome the Economic
Secretary’s indication that the Revenue is convinced that 90
days would indeed be too long, and that it would anticipate paying out
on the film tax credit much more quickly than that. My point is
sufficiently made with that indication from the hon. Gentleman, which I
welcome, so I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn.
Ed
Balls: I beg to move amendment No. 24, in page 173, line
33 [Vol I], leave out ‘that Chapter' and
insert ‘Chapter
3 of Part 3 of the Finance Act 2006'.
This small amendment addresses
a slight drafting defect in the Bill, which we want to set straight.
Part 2 of schedule 5, paragraphs 14 to 25, makes changes to schedule 1
of the Films Act 1985. Schedule 1 sets out the rules for certification
of films as British. The new tax relief requires a number of changes to
those rules and some of those changes require references back to
chapter 3 of part 3 of the Finance (No. 2) Bill or, as I trust it will
eventually become, the Finance Act 2006. The amendment simply inserts a
full reference to chapter 3 of the forthcoming Act, instead of the
phrase “that chapter”, which is not otherwise
defined. Amendment
agreed
to. Question
proposed, That this schedule, as amended, be the fifth schedule to
the
Bill.
John
Hemming: This comes back to the previous point. I am
trying to assess how this relief gets paid. I accept the point about
the research and development tax credit which is funded right at the
start of the project, but there are two issues here. First, there is a
massive nuisance in that to qualify for this relief one has to take the
tail end income and count that at the start of the project. One does
not have the cash, but one must account for a profit that will be made
on income that will be received in perhaps a couple of years’
time and one must account for it as soon as one starts spending money
on the project. That is a real burden.
The question is, what is the
benefit? The benefit is the availability of a tax credit where there is
a surrenderable loss. With various complications, which are not as
complicated as those surrounding capital gains tax and so on but are
still quite complicated, one will possibly get between 16 and 20 per
cent. of the surrenderable loss at the best of times. The real question
is how in the real world we will have a situation where someone will be
paid a tax credit. If the calculation is on the basis of a loss, it
must be a loss over the whole of the project on the basis of the
initial calculation as to the estimated income, unless there is
something else within the entity that is losing money. That is the
issue that interests
me. Jeremy
Wright (Rugby and Kenilworth) (Con): I simply wanted to
ask a question in the absence of the hon. Member for Dundee, East
(Stewart Hosie). I am sure that he would have asked it if he were here.
It relates to paragraph 25, particularly subparagraphs (5) and (6),
which deal with the agencies that are entitled to conduct a prosecution
for the wrongful disclosure of information related to Revenue and
Customs. It is clear
which agencies prosecute in England and Wales and in Northern Ireland,
but which agency would do so in
Scotland?
Ed
Balls: I will reflect on that and try to find an answer in
due course. First I shall make some remarks about the schedule and the
loss rules which I hope will help to clarify matters. The schedule is
in four parts. The first sets out how the relief is calculated. The
second part amends schedule 1 to the Films Act 1985, which deals with
the certification of films in Britain. The third part provides claims
machinery for the relief. The fourth part deals with claims for relief
made before a film is completed. Finally, to answer the hon. Member for
Rugby and Kenilworth (Jeremy Wright), in Scotland prosecutions under
the schedule would be taken forward by the procurator
fiscal.
2.30
pm
Jeremy
Wright: I am impressed by the speed at which the Minister
can get these answers. But why is it not in the
schedule?
Ed
Balls: That is an interesting
question.
Chairman:
Order. The hon. Gentleman cannot intervene while the Minister is still
attempting to answer the question. When the Minister has finished
answering it, the hon. Gentleman may be at liberty to intervene
again.
Ed
Balls: I apologise, Sir John. It is helpful to be set
straight on that point of procedure. I was about to say that if that
issue had occurred earlier to the hon. Member for Rugby and Kenilworth,
I presume that he would have tabled an amendment to clarify this
schedule to the Bill. Obviously, that thought did not occur to him
until a much later stage.
Mr.
Francois: Or, indeed, to the
Minister.
Rob
Marris: Will my hon. Friend the Economic Secretary give
way on that
point?
Ed
Balls: No. I am told that, in Scotland, the Procurator
Fiscal Service is not only an authority that may deal with these
matters but the only one that may do so. Therefore, it might be thought
to be overburdening the schedule to state the obvious within it.
However, we will reflect on the drafting advice of the hon. Member for
Rugby and Kenilworth for future occasions.
Rob
Marris: My hon. Friend has partially answered this, but
just to clarify: I did not put in an amendment because the words on
line 42 are, “England and Wales only”. Paragraph 25(5)
narrows down the possibilities as to who might bring a prosecution and
so on; no such narrowing down was required in Scotland for the very
reason that my hon. Friend has given.
Ed
Balls: I am grateful to my hon. Friend and, referring back
to earlier comments in response to the intervention by the
hon. Member for Rayleigh (Mr. Francois), the Committee should
be reassured to know that my hon. Friend the Member for Wolverhampton,
South-West is scrutinising our proceedings with such care. In an
analogy with the Bank of England, where a decision not to raise
interest rates is as important as the decision to do so, knowing that
my hon. Friend considered whether an amendment was necessary and
decided not to table it provides me with a similar degree of
reassurance as if he had. Therefore we can move on, comfortable in the
knowledge that he is keeping a close eye on proceedings, from whichever
Bench. I turn to the
other matters of substance in hand.
Mr.
Francois: Returning for a moment to
film.
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