Mr.
Francois: I am grateful to my hon. Friend for that
intervention, which serves to amplify my point. BlackBerrys have a
multi-functionality. The question for tax purposes is, which
functionality will be taxed in that instance? Will the Paymaster
General confirm whether the clause will define BlackBerrys as computers
rather than mobile phones? If so, it would presumably be possible to
have one of each without incurring an additional tax charge as a
benefit in kind. Following the associated changes to clause 61, that is
assuming that any personal use of the BlackBerry, if it were a
computer, is deemed not to be
significant. To clear
up the ambiguity, can the Paymaster General clarify exactly how clause
60 is intended to operate in practice? Are there any circumstances in
which there could still be a tax benefit in kind for a single
employer-provided mobile phone? If so, what are they? Can the right
hon. Lady say how BlackBerrys are to be categorised for the purposes of
the Bill? Are they excluded from clause 60? If so, they will presumably
be dealt with under clause 61 instead. It would be helpful if that
matter were clarified,
too. Jeremy
Wright (Rugby and Kenilworth) (Con): I wish to ask the
Paymaster General to clarify one matter. I am sure that she will easily
be able to answer my question. Under the old system, multiple mobile
phones could be provided by the employer without incurring tax
liability. If replacement multiple phones are provided now by an
employer, will they come under the old regime or will they be caught by
the new
regime?
Dawn
Primarolo: I am in some difficulty in answering the
questions that I have been asked because most of them have nothing to
do with clause 60. I shall deal first with that clause. I shall then
take your guidance, Mr. O’Hara, on the other
points. Clause
60 replaces the tax exemption that prior to6 April enabled an
employer to make available a mobile phone for private use. Business use
is separate. It is in a different part of the tax Acts and is not
affected by the clause. The mobile phone is for private use of the
employee and, as it turns out, members of the employee’s family
and household. The clause will give exemption to one mobile phone per
employee for private use. There is no need for significant private use,
business use and so on. The mobile phone is for private use and always
was. 11.15
am The
clause limits the tax exemption so that only one mobile phone can be
made available to each employee tax free, but it excludes the
employee’s family and household. The clause also makes it easier
for employers to provide that mobile phone, as prior to 6 April, a tax
charge arose on the provision of a non-cash voucher or credit token to
make mobile phones available for private use. They were often used by
smaller employers who found it easier to give employees credit tokens
to go to a mobile phone shop and buy the relevant phone. The
clause has nothing to do with requirements in respect of business and
business use, which are quite
different. The
hon. Member for Rayleigh (Mr. Francois) asked one other relevant
question, about BlackBerrys and personal digital assistants. Last year,
sustained lobbying from the home computer initiative providers and
accountants persuaded the HMRC that the functions of the new generation
of PDAs and BlackBerrys made it more appropriate to include them in the
exemption under computer equipment. Therefore, they are not covered by
the
clause. The
hon. Gentleman raised the matter of a commitment to upgrading mobile
phones every 18 months or where there is an interaction with the
Consumer Credit Acts and arrangements should have been made on transfer
at the time. If an employer and an employee have entered into a salary
sacrifice arrangement that entitles the employee to the private use of
a mobile phone—I am talking about private use only—and
extends for more than 18 months, the agreement is covered by the
consumer credit legislation. Guidance has already been given and if
employers found themselves in difficulty, the HMRC would take that into
consideration and so would the Office of Fair Trading.
There is
always discussion about which side of 6 April the arrangement
was entered into. The employer will have to show the HMRC that, prior
to 6 April 2006, it was in the process of setting up a scheme that
involved making mobile phones available to its employees for private
use, and the arrangement would then roll forward; it is quite a well
used measure. My advice is that in each case if there is a renewal or
if arrangements have been entered into but have not quite been
completed, they will be covered as long as the employer can demonstrate
that to the HMRC.
The questions about
significant private use and business use are not relevant to the
clause, but I can answer them briefly if you think it would be helpful,
Mr. O’Hara. I can tell the hon. Gentleman that in respect of
business mobile phones, where an employer makes more than one mobile
phone available—for example, if an employee is travelling and
goes into different world tariff zones, it is easier to have more than
mobile phone—there is a rule, which has been in force since
before 1999, that where there was significant private use, or where the
private use was insignificant but the phone was given for business
purposes, the private use would not be counted and would not be taxed.
As a result of changes to clause 61, there have been requests for a
restatement in guidance of what was operational before.
Discussions
are taking place between the HMRC and a number of different
organisations such as the CBI, the Institute of Chartered Accountants
in England and Wales and the Chartered Institute of Taxation. That will
lead to published guidance so that there is no doubt about the
provision of business phones for private use. The provision of a
private phone, tax free, simply for private use was supposed to help
employers with the divide between business and private use. This
provision is about a mobile phone given to an employee for private use
tax free and the clause simply restricts it to one phone per employee
instead of the entire family. That is entirely
appropriate.
Mr.
Francois: I am grateful to the Paymaster General for that
clarification. There appears to have been some
confusion, including among some professional accounting firms, about
what the Government were trying to do. The whole purpose of going
through the Bill clause by clause is to clarify those matters. I am
glad that we have had an opportunity to do that this
morning.
I do not
want to transgress the border between clauses 60 and 61, but as the
Paymaster General referred to the guidelines on the definition of
clause 61, which will affect the definition of significant personal use
of a business mobile phone—I understand the distinction that she
made—could I with your indulgence, Mr. O’Hara, ask her to
give us some idea of when she believes those discussions will be
complete and when those guidelines will be made available? All members
of the Committee would be interested in an approximate timing if she
can provide that before we move on to the next
clause.
Dawn
Primarolo: The guidance will be produced as soon as it is
possible. First, there is the consultation. Then the draft guidance
will be issued to ensure that it covers all the points made and then it
will be released. I hope that those who have made comments will have
time to look at the guidance before it is issued. There is always a
difficult balance to strike here. If people want to comment on the
draft they will have to do so speedily because it is intended that the
guidance will be ready by the end of July so that it runs in sync with
the Bill and its final stages. I hope that hon. Members will appreciate
that if we get a last-minute comment, we will need to look at it very
carefully. Question
put and agreed
to. Clause 60
ordered to stand part of the
Bill. Clause
62 ordered to stand part of the
Bill. Clause
63Power
to exempt use of vouchers or tokens to obtain exempt
benefits Question
proposed, That the clause stand part ofthe
Bill.
Rob
Marris: I apologise for not welcoming you to the Chair
when I spoke earlier, Mr.
O’Hara. Will
my right hon. Friend explain a technical drafting matter? We have had
debates on mobile phones and, under clause 62, we did not have the
debate on eye test vouchers. Why are those matters in primary
legislation whereas, in clause 63, vouchers for benefits in kind are to
be covered by Treasury regulations? In one case, we are using primary
legislation and, in the other, we are broadening the net by requiring
regulations under proposed new subsection 96A of the Income Tax
(Earnings and Pensions) Act 2003, as set out in clause 63. What was the
guiding principle on the
matter?
Dawn
Primarolo: The principle was to give us the flexibility to
ensure that employment-related benefits that would otherwise be exempt
from tax will remain so. A series of benefits are recognised as being
employment related, which I am sure that no hon. Member would dispute.
When we examined the issue of eye tests and corrective glasses for VDU
users, it became clear that it was more sensible to have a
regulation-making power to
enable their provision. That will give us the opportunity to respond far
more quickly to issues on benefits generally agreed to be work
related. Question
put and agreed
to. Clause 63
ordered to stand part of the
Bill.
Clause
64Payments
to or in respect of victims of National-Socialist
persecution Question
proposed, That the clause stand part ofthe
Bill.
Mr.
Francois: I rise to voice briefly our approval of the
clause. In doing so, I declare for completeness an interest as a member
of the Conservative Friends of
Israel. The clause
exempts from tax payments by UK and foreign banks and building
societies to holocaust victims and to their heirs for dormant accounts.
The issue is sensitive and I do not think that it needs to be rehearsed
at length here. It seems that the consultations on it have been
successful, and we welcome the
clause. Ms
Celia Barlow (Hove) (Lab): May I say to my right hon.
Friend that the clause is very welcome in Hove and Portslade where
there is a large Jewish population, many of whom moved here in the
1930s and 1940s or are the children of the people who did so. Many
local families fled central Europe, and some of them still remember the
horrors.
It is
reassuring that the clause was drafted after negotiations with the
Association of Jewish Refugees. I realise that the provision already
existed as an extra-statutory concession, but enshrining it in law will
give victims of Nazi persecution and their heirs the security of
knowing that their family money can be retrieved without loss. That is
why I support the clause
wholeheartedly.
Mr.
Newmark: I join my hon. Friend the Member for Rayleigh in
welcoming the clause. We do not often congratulate the Paymaster
General on her written ministerial statements, but it was heartening to
see the intention that she expressed on 19 July last year carried into
effect in the
Bill. The numbers
involved are small, both in terms of the assets involved and the people
who stand to receive them. The Times estimates that since 1998
claimants in the UK have shared nearly £7.5 million from the
Claims Resolution Tribunal, which handles claims on deposits in dormant
Swiss accounts. The average award has been approximately
£74,000. The Guardian is, unfortunately, a little more
parsimonious, stating that the Government estimate that those affected
in the UK are owed an average of £31,000 and that around 1,000
people will benefit from the clause. The Exchequer cost is also minimal
if we accept the Government’s estimate of between £5
million and £10 million.
The
principle of the clause is important. Payments under Restore UK to
those who are eligible should be indistinguishable from compensation
under comparable international schemes such as the Claims Resolution
Tribunal. That has not been the case under the existing extra-statutory
concession, which in applying only to the domestic scheme has
introduced an unwanted distortion into the taxation of compensation
payments. 11.30
am David
Rothenberg, treasurer and vice-chairman of the Association of Jewish
Refugees, has responded positively to the proposals and the thorough
consultation that preceded them. He
said: “We are
delighted that the Government has responded positively to our request
to introduce this important extension to Holocaust victims and their
families of the concessions which applied to compensation from British
banks so that the families of Holocaust victims will receive the full
benefit from their compensation
awards.” I
also welcome the fact that the tax exemption will be given a statutory
footing rather than being couched as an extra-statutory concession. It
is important that the tax exemption should carry the weight of
parliamentary approval rather than bearing the stigma of being
perceived as a Revenue fiddle. HMRC describes extra-statutory
concessions as necessary
“when strict application of the
law would create a disadvantage, or the effect would not be the one
intended.” We
would argue the toss whether a simple and equitable tax system should
need such concessions to unintended consequences, but there is a
consensus that the exemption of compensation payments from taxation is
morally right. That being so, I think that we would all agree that a
clause in the Finance Bill dedicated to that purpose is preferable to
the Revenue backhander that has persisted for the past six
years. It
is good to see the Government taking a clear lead on the issue, and I
congratulate them. Elsewhere in Europe, those who suffered from
national socialist persecution still face an uphill battle to receive
the compensation to which they are justly entitled. For example, the
Austrian general settlement fund, a£210 million
compensation fund created in 2001, is still experiencing problems
administering claims. As of last November, not a single claim had been
paid out. For once, the Government are in a position to lead by
example. Let us hope that other countries catch
on.
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