Dawn
Primarolo: The hon. Gentleman could, but it would be
illegal. That is the point of some of the amendments.
[Interruption.]
Mr.
Goodman: I shall pass over that interjection, in case it
finds its way into Hansard, which I fear it has. I do not know
whether the Paymaster General was suggesting that the amendment would
be illegal, but I can understand her impatience as I am about to tax
her again with one of the examples that I have a way of raising. I hope
that she will address it more directly than she did the previous
example. The clause
will extend restrictions on gift aid payments by close companies to
non-close companies. The argument has been put to me that it is likely
to hurt charities that run substantial corporate benefactor schemes and
that the maximum benefit of £250 is minimal and will discourage
companies from entering into such schemes. An example was given to me
by, needless to say, the Charities’ Tax Reform Group. Let us
suppose that the National Trust were trying to raise £500,000 to
repair a property and a corporate benefactor agreed to donate
£250,000. The National Trust might begin to raise the rest by
holding a fundraising dinner, selling tickets at £100 a head.
The corporate benefactor might be given a free table in recognition of
its generosity and to encourage other substantial contributions. If the
benefit to the benefactor exceeded £250, the charity would lose
gift aid on the whole £250,000 donation. The argument put to me
was that if the Government are unwilling to delete clause 58, at the
very least the upper limit should be raised from £250 to
£2,500 to allow charities to devise effective corporate
benefactor schemes and to encourage companies to be generous in
entering
them. 10.45
am
Dawn
Primarolo: Company gift aid is a tax relief
specifically designed for gifts to charities, not for payments that
convey potential, substantial benefits on the donor company and those
running it. In the Government’s view, the existing benefit
limits are sufficient for charities to express their gratitude for a
donation. We are talking about the benefits conveyed to the donor
company by the charity when it says thank you for a donation. I say to
the hon. Gentleman that there is no evidence to suggest that ensuring
that donations to charities benefit principally the charity and not the
giver—that is precisely what the clauses before us will
do—will harm corporate giving.
A balance needs to be struck
to ensure that companies do not benefit if they make a payment to
charity with the aim of benefiting principally themselves and not the
charity. The limit is there to prevent the glorious events that are
designed to benefit those attending, but have little charitable
benefit. That goes to the heart of the purpose of gift aid. I hope
therefore that, given the narrow focus of the limit, the hon. Gentleman
will accept that it is appropriate.
I remind the Committee that
this series of clauses will deal with the misuse of charitable status
by those who would put pressure on charities, or use them in order to
benefit themselves, but not the charity. I want to reinforce that
point. I hope that the hon. Gentleman will accept that explanation of
why amendment No. 95 is unattractive and why I do not want the
Committee to pursue it.
Mr.
Goodman: In short, the Paymaster General argued that the
Treasury accepts the principle of a limit because charities might
benefit from the relief given to the donor, such as in the example that
I gave. However, given that a higher limit might actually benefit the
charities, she did not justify why the level should be £250
rather £2,500. I was not satisfied with her explanation so I am
inclined to press the amendment to a
vote. Question
put, That the amendment be
made:— The
Committee divided: Ayes 8, Noes
20.
Division
No.
2] Question
accordingly negatived.
Clause 58 ordered to stand
part of the
Bill.
Clause
59Cars
with a co2 emissions
figure Question
proposed, That the clause stand part of the
Bill. Rob
Marris (Wolverhampton, South-West) (Lab): The Government
introduced the regime to change the way in which company cars are taxed
several years ago. I think that I am right in saying that the majority
of new cars bought in the United Kingdom are still company cars. The
Government have had huge success with the regime. It has really changed
the way in which company cars are bought, and the CO 2
emissions of the company car fleet have been falling year on year in
contrast to the CO 2 emissions of private average cars, which
have been increasing in the past couple of
years. My hon. Friend
the Financial Secretary to the Treasury would probably term what I am
about to say as an early bid for next year. I welcome the proposals
under clause 59 at the lower end of the scale so that, when the 3 per
cent. diesel supplement is dropped, some cars will drop to a 10 per
cent. valuation for company car tax purposes. However, having had such
success with changing buying plans for company cars in recent years,
the Government have missed a major opportunity by not greatly
increasing the figure at the upper end of the scale. I urge my hon.
Friend to take such action next year.
Mr.
Goodman: The hon. Gentleman was certainly right about the
lower end of the scale. Will the Financial Secretary comment on the
remarks of Stewart Whyte, the director of the Association of Car Fleet
Operators, about the clause? He
said: “Generally,
it is a broadly neutral budget for the fleet industry with no major
changes. However, the further tightening of company car tax in 2008-09
is a minor disappointment. It is clear that vehicle manufacturers are
having some difficulty in driving through the technological changes
that will see a significant rise in the number of very low
CO2-emitting cars on
sale.” We certainly
explored that issue in the debate on vehicle excise duty. He went
on: “We hope
that all parties will work together to ensure that the typical car
becomes much more fuel- and CO2-efficient—and
therefore tax-efficient—so that the impact on drivers of the tax
change is neutral. We cannot have a company car tax system which takes
no account of the technical realities of the vehicles available and, as
a result, penalises company car drivers through no fault of their
own.”
The
Financial Secretary to the Treasury (John Healey): Clause
59 is a further step in the reforms that we put in place in 2002 to
base the company car tax system on carbon dioxide emissions as a
contribution to meeting the challenge of climate change. My hon. Friend
the Member for Wolverhampton, South-West (Rob Marris) is right to say
that it has been a success. Our first stage evaluation demonstrated
that the average emissions of company cars in 2004 were some 15 g per
kilometre lower than they would have been had we not put the reforms in
place. On his point about top rates, he is nothing if not consistent.
He made the same point in relation to top rates of vehicle excise duty
in earlier discussions on the Bill. He is right that I will not accept
the argument at this stage in the debate on this clause, but I will
take it as an early Budget representation for 2007.
We are making two changes to
reinforce the environmental effect of the company car tax regime.
First, the clause reduces the level of carbon dioxide emission
qualifying for the lower threshold by 5 g per kilometre to 135 g per
kilometre from 6 April 2008. That will provide a continuing incentive
for company car drivers and their employers to choose more
fuel-efficient cars. It will also encourage manufacturers to produce
cars with lower carbon dioxide emissions.
The hon. Member for Wycombe
(Mr. Goodman), is right to quote Stewart Whyte, and Mr. Whyte was right
to say that the measure is broadly neutral for the industry. It is also
neutral for the Exchequer. We do not anticipate an impact on revenues
from the company car tax regime when the changes come in in 2008-09. If
the hon. Member for Wycombe has discussed it with him, Mr. Whyte will
also have pointed out that the industry was expecting the Government to
move in this direction. We have been discussing it for some time, and
did so again in the run-up to the Budget. The point about setting the
rates three years in advance is that that is not just advantageous for
companies that make cars available to their employees for private use;
it is also a useful long-term signal for car designers and
manufacturers about the policy direction of the Government.
The
clause’s second incentive for company car drivers and their
employers to choose more fuel-efficient vehicles is the introduction of
a new 10 per cent. rate for company
cars with carbon dioxide emissions of 120 g per kilometre or below.
Setting the levels now for 2008-09 gives drivers a degree of certainty
about how much their company cars will cost them for the next three
years. Because company cars are typically held for three or four years,
setting the threshold for that period in this Finance Bill enables
businesses to plan ahead sensibly for their car fleets and company car
drivers to calculate the full cost of company cars that will be
reviewed in the next three years. On that basis, I hope that the
Committee will accept the clause. Question put and agreed
to. Clause 59
ordered to stand part of the Bill.
Clause
60Mobile
telephones Question
proposed, That the clause stand part ofthe
Bill. Mr.
Mark Francois (Rayleigh) (Con): May I, too, welcome you to
the Chair, Mr. O’Hara? The most controversial part of chapter 5
of the Bill, which deals with personal taxation, is undoubtedly clause
61, which paves the way for the abolition of the popular home computing
initiative, a decision that is still very much to be regretted, but
that we dealt with in some detail in the Committee of the whole House.
Clause 60 is an associated though less immediately controversial issue.
Essentially, it seeks to limit to one phone any tax reallocation of
mobile phone use by an employer to an employee. It was covered by the
same regulatory impact assessment as clause 61, to which I shall refer
shortly.
11
am There are two
areas in which it would be helpful to have clarification from the
Paymaster General on the intended operation of the clause.
To begin with, there appears
to be a residual ambiguity as to the permitted degree of personal
use—if any—of the one mobile phone to which the clause
refers, and on the tax implications, because there are differences
between what is said in the Bill and the explanatory notes on the one
hand and in the subsequent regulatory impact assessment on the other.
On clause 61, the
Government now say that people who are provided by their employer with
a computer at home for business purposes will not be taxed on that
computer as a benefit in kind, provided that any personal use of it is
not significant. After debate, the Paymaster General offered to consult
employers to define the term “not significant,” and I
understand that that work is ongoing. However, I should like to know
the parallel position under clause 60 in relation to mobile phones that
are provided for business
purposes. The
explanatory notes initially implied that there was to be no attempt to
regulate the extent of such private use for the purposes of identifying
a taxable benefit in kind. Paragraph 1 of the notes states, fairly
clearly: “This
clause replaces the exemption for employer provided mobile telephones
in section 319 Income Tax (Earnings and Pensions) Act 2003. It provides
that no tax will be due when employers make only one mobile telephone
available for private use and removes the availability to family or
household tax-free.”
Paragraph 16 of the notes then
says: “The
clause re-focuses the relief provided by the exemption, keeping
administrative burdens for employers to a minimum where a mobile
telephone is provided for business use and private use is also
made.” Furthermore, when
one looks at the clause, one sees that new section 319(1) to be
inserted in the Income Tax (Earnings and Pensions) Act 2003
says: “No
liability to income tax arises by virtue of section 62 (general
definition of earnings) or Chapter 10 of Part 3 (taxable benefits:
residual liability to charge) in respect of the provision of one mobile
telephone for an employee without any transfer of property in
it.” So far,
so good. However, the associated regulatory impact assessment, which
was signed by the Paymaster General on 24 April—a fortnight or
so after the changes made by clause 60 came into effect—observes
that there are now some 50 million mobile phones in use in the United
Kingdom. That is a very large number. The RIA does not attempt to break
it down into phones provided primarily for business purposes and those
that are for personal purposes, but at paragraph 41 it
states: “Employers
will still be able to benefit from the deregulatory objectives behind
the mobile phone exemption when only one mobile telephone is made
available for private use or where a mobile phone is provided for
business purposes and there is insignificant private
use.” However, paragraph
23 of the RIA, entitled “Implementation and Delivery
Issues,” states more
explicitly: “Where
additional mobile phones are made available for private use or where
private use of a business mobile phone is significant it will be liable
to a tax charge and Class 1A National Insurance in the same way as any
other benefit in
kind.” So a
literal reading of the RIA implies that there could be a benefit in
kind in certain circumstances of provision of an individual mobile
phone. If that were the case, employers might be expected to define for
taxation purposes the amount of personal use of that mobile phone, even
if they had provided only that one mobile phone to their employee.
There might be a considerable compliance burden for companies that
sought legitimately to remain on the right side of the line. The
regulatory impact assessment acknowledges the potential compliance
burden at paragraph 54:
“Compliance costs would
arise from employers having to report to HMRC the benefits in kind that
would be subject to tax and Class 1A NICs under these proposals, the
potential need for records to be kept and the implementation of extra
coding notices for
employees.” The length
of that process might be considerable. For example, if a mobile phone
were provided primarily for business use, employees and employers might
have to spend hours trawling through mobile phone bills to identify
incidental private use and establish whether it was significant. That
decision would in itself be subjective, and it might lead to
unnecessary disputes between employers and employees, and then, indeed,
employers and HM Revenue and Customs.
If, as is often the case in
this day and age, the employer paid a fixed monthly amount and call
charges were free up to a certain limit, how would
“significant” be determined? How should the employee
quantify the additional cost to reimburse his or her employer in order
to avoid a tax charge? Put another way, assuming that the employee does
not or cannot
identify the cost of private calls, how should the employer compute the
taxable amount in order to remain on the right side of the
line? The Institute
of Chartered Accountants in England and Wales considered the issue, and
it made the following point about this clause:
“If significant private
use of mobile telephones is to be taxable once again, we suggest that
there should be a flat rate charge, as was the case before it was
abolished from 6 April 1999. This proposal will avoid the need for
complex benefit calculations resulting from the availability of a wide
variety of payment
plans.” For
clarification, will the Paymaster General confirm exactly how the new
regime is intended to operate? Specifically, will there be a tax charge
for a benefit in kind even on one employer-provided mobile phone if the
private use of such a phone is deemed significant? Can we expect new
guidelines to define insignificant as opposed to significant personal
use? We will be given guidelines in relation to home computers, for
instance, and paragraph 73 of the regulatory impact assessment implies
that guidelines will apply to both.
If we are going to receive
guidelines relating to mobile phones, when are they likely to be made
available, given that the measure is already supposed to be in force?
Who will be involved in drawing up such guidelines, and what
consultation, if any, will take place? There appears to be a dichotomy,
so will the Paymaster General clarify the issue for the Committee
before we allow the clause to stand part of the Bill?
There is an
associated point that requires clarification. It concerns BlackBerrys.
They are becoming increasingly common in business—and in this
place, too. I thought that in making this point, I had best declare a
personal interest, if only for safety’s sake. In a post-Budget
note on employer-provided mobile telephones, Deloitte and Touche called
for clarification of the status of BlackBerrys, as did KPMG. In
addition, in a recent tax alert note on the subject, Ernst and Young
pointed out the following:
“No guidance has been
given from HM Revenue and Customs to employers about how to determine
whether a device’s primary purpose is a mobile phone or whether
the mobile phone capability should be considered a secondary
feature.” Subsection
(4) of proposed new section 319 defines a mobile telephone as
“telephone apparatus”, which means,
“wireless telegraphy apparatus
designed or adapted for the primary purpose of transmitting and
receiving spoken messages and used in connection with a public
electronic communications
service.” The
key phrase is “primary purpose”. BlackBerrys usually also
encompass a mobile telephone capability. However, arguably, they are
not designed primarily for that purpose. Therefore, they appear to be
in a grey area as they can also be used for transmitting messages such
as e-mail and for obtaining information from the internet. The more
modern BlackBerrys allow us to surf the world wide
web.
Mr.
Brooks Newmark (Braintree) (Con): I must confess to having
an interest. Although I do not own a BlackBerry, I own a Palm Treo,
which has the same impact as a BlackBerry. My hon. Friend makes an
excellent point about non-verbal communication. What may be helpful is
the fact that all my bills, and I believe all of his, when they are
telephonic are itemised. Therefore, any tax
inspector of the Revenue can see clearly what is for business and what
is for personal use. Perhaps we should be considering that as well,
because those devices are for both written and verbal
communication.
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