Jane Kennedy: Those bodies would need to be very swift indeed. We would want to research a suggested model carefully, so that the Treasury and HMRC could thoroughly understand what the economic impact of any such model might be before we brought it forward through the PBR for consultation. There is no point of
The hon. Member for Fareham asked me to elaborate on how the Treasury arrived at its figures. The figures that he drew upon came from the document that we published in December, Paying a fairer share: a consultation on residence and domicile. I could elaborate at length, but I do not think that it would be of great value to the Committee. There is not a lot more that I can add to the figures. They were based upon estimates of people who were considered as needing to use the day-counting rulesair crew and others who would have to count the number of days that they were resident in the UK. It is true that to some degree they were estimates, but they were the best estimates based on the figures that we had. It would not necessarily be helpful to the Committee to enter into a vague debate about those figures.
Based upon the representations that I have heard this morning, and on Tuesday evening, the principle being pressed is that we should consider a statutory residence test. I have said that I am open to those representations and I think that it would be best to leave it at that for now. I hope that the hon. Members for Taunton and for Fareham will accept that the specific example of a residence test, which the hon. Member for Taunton has put forward, is a little premature for us to accept. Equally, it is not necessary for us to be required to lay a report in the way that the hon. Member for Fareham has suggested. I have made it clear that I will use my good offices to do so when we have arrived at consensus. I know that the Chancellor does not like issues such as this to remain unsettled, so it would be better if we could see what consensus can be arrived at quickly, and move forward on that basis.
Mr. Browne: That was a helpful speech from the Financial Secretary. I have some sympathy with her Treasury Ministers, and Ministers in any Department for that matter: if they consult widely, they are criticised for not moving with sufficient haste, and if they fail to consult widely, they are told that they are not listening sufficiently to representations. I hope that the Treasury can strike a balance between those two positions and, as the Financial Secretary says, take on board a lot of the comments that have been made by outside bodies. Such comments are made with the good intention of having a system that is easier for them and all citizens to understand, whether they be UK residents or those who come here only periodically.
I did not anticipate the Financial Secretary accepting the new clause, and I acknowledge that a new clause drawn up by me and my hon. Friends, albeit with the assistance of people in professional bodies, is unlikely to be introduced off the peg by the Government. However, I hope that it will at least provide a kick-start to a
Mr. Hoban: I want to make two comments. I welcome the Financial Secretarys remarks. She has indicated an openness to the debate on the need for a statutory residence test, and has sent a clear signal to the representative bodies that we need to work quickly. I am sure that they will take note and respond to that signal, so that the debate can be moved forward as quickly as possible. That is in everybodys interest. The Financial Secretary has dealt with the statutory residence test, but not with the questions I raised on Tuesday evening about when we will see a revised IR20, and what guidance will be produced on in-transit rules. She did deal with the issue of cost. I would be grateful if she could respond now.
Jane Kennedy: If the hon. Gentleman will forgive me, I had an answer for him on Tuesday afternoon but I have now mislaid that. I have found it. I beg the Committees pardon.
Once the Bill is passed, HMRC will publish a revised IR20. That will, however, be temporary, as HMRC is rewriting all the guidance covering residence and domicile, which will include the 2008 Budget changes. It will be appropriate to wait until those changes have been made before the guidance is completely rewritten. The new guidance will be subject to consultation, following Royal Assent.
Mr. Hoban: I am grateful for that clarification, and also that there will be consultation. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 22 ordered to stand part of the Bill.
Clause 23 ordered to stand part of the Bill.
Jane Kennedy: I beg to move amendment No. 339, in schedule 7, page 151, leave out lines 20 to 28 and insert
(3) Sections 42 and 43 of TMA 1970 (procedure and time limit for making claims), except section 42(1A) of that Act, apply in relation to a claim under this section as they apply in relation to a claim for relief.
809BA Claim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809G(2) is to apply
(1) This section applies to an individual for a tax year if the individual
(a) is aged 18 or over in that year, and
(b) has been UK resident in at least 7 of the 9 tax years immediately preceding that year.
(2) A claim under section 809B by the individual for that year must contain a nomination of the income or chargeable gains of the individual for that year to which section 809G(2) is to apply.
(3) The income or chargeable gains nominated must be part (or all) of the individuals foreign income and gains for that year.
(4) The income and chargeable gains nominated must be such that the relevant tax increase does not exceed £30,000.
(5) The relevant tax increase is
(a) the total amount of income tax and capital gains tax payable by the individual for that year, minus
(b) the total amount of income tax and capital gains tax that would be payable by the individual for that year apart from section 809G(2).
(6) See section 809Z for the meaning of an individuals foreign income and gains for a tax year..
The Chairman: With this it will be convenient to discuss the following: Government amendments Nos. 340 to 343.
Amendment No. 52, in schedule 7, page 153, line 37, at end insert
(6) Subsection (4) shall not have effect until
(a) the Treasury has laid before the House of Commons a report setting out its assessment of the impact of the charge on
(i) foreign nationals in low-paid employment,
(ii) small businesses employing foreign nationals, and
(iii) higher education institutions; and
(b) the report has been approved by resolution of the House of Commons..
Government amendments Nos. 344 to 350.
Jane Kennedy: I will speak briefly, as has been my habit, but I will seek to answer any detailed questions on Government amendments Nos. 339 to 343. I draw attention to Government amendments Nos. 339 and 342, which will introduce changes in the Bill to ensure that the £30,000 charge should be creditable under the UK-US double taxation agreement. I was keen to address that concern. I commend the group of amendments to the Committee and am happy to respond in detail to any questions.
Mr. Browne: Amendment No. 52 is in my name and those of my hon. Friends so I will explain the purpose of it. Before I start, I remember being criticised by Committee members for my absence of drafting skills on Tuesday afternoon. Given the number of Government amendments to the schedule, there are others who need to do their homework in that regard. This part of the Bill is a cautionary tale for the Government about the perils of aping Conservative policy. All kinds of lessons can be learned from looking at these proposals in more detail.
The Institute of Chartered Accountants, among others, was concerned about this proposal. It may not have much of an impact on the so-called super-rich, who will feel that the levy is not too much of a financial burden, but it may have a detrimental impact on other categories of people, particularly those with less money. There may be damaging consequences for some individuals, for certain sections of the economy and for the UK economy as a whole.
Amendment No. 52 would delay the implementation of new section 809G(4), which sets the £30,000 charge for claiming the remittance basis, until the Treasury has produced a report to assess the impact of the charge on three categories. The first is foreign nationals in low-paid
Ben Chapman (Wirral, South) (Lab): May I make the point that my question related to the case made by the Liberal Democrats on the proposal under discussion? It did not relate to the case that had or had not been made by the Government.
Mr. Browne: I have the highest regard for the hon. Gentleman so I do not wish to imply that he had been disloyal or troublesome as a member of the Committee. He has wisely shown no inclination to do that.
In conclusion, the purpose of amendment No. 52 is to allow greater reflection on the impact of the £30,000 charge on the groups that I mentioned.
Mr. Hoban: I should like to raise a couple of questions on the Government amendments. In moving the amendment, the Financial Secretary made a point about ensuring that the £30,000 charge is creditable under the UK-US double taxation treaty. I wonder what happened in the period between the Budget and the Government tabling these amendments. The Treasury commissioned Skadden, a respected US law firm, to comment on the creditability of the charge as set out in the Budget. The conclusion it reached was that in the absence of current guidance by the US treasury or the IRS, the charge would be creditable against United States federal income tax. To be fair to them and to the Minister, there followed various caveats, as lawyers are very good at, but will the Minister set out more clearly, for the benefit of those who pay close interest in these proceedings, who are concerned about creditability, what aspects of the amendment improve the chance of the IRS and the US treasury seeing it as a creditable tax charge?
On the specific amendments, amendment No. 339 puts a cap on the remittance charge at £30,000. The Institute of Chartered Accountants asks what happens if the amount nominated exceeds £30,000, either by errorif an individual has nominated higher gains or income by mistakeor if, when looking at the amounts to be nominated, having originally reached a point of having £30,000, later on perhaps a relief has been changed or amended which means that, because of those tax changes, the gains exceed £30,000.
Amendment No. 342 sets out what happens when an individual nominates less than £30,000 upon income or gains. The amendment treats that individual as if they had nominated £30,000. Would it not have been easier for taxpayers simply to elect to use a remittance basis without having to nominate the gains? The amendment seems to create a situation where, if someone only nominated, say, £1, they would be deemed to have
Amendment No. 346 makes it clear that only those gains or income that have not been nominated are taken into account when capital, income or gains have been remitted. Would the Minister outline what the consequence will be if the taxpayer remits nominated foreign income or gains?
Jane Kennedy: I invite the hon. Member for Taunton to be a little cautious in representing his party, bearing in mind the comments of his hon. Friend the Member for Twickenham who, as recently as their partys spring conference in my home city of Liverpool, divided the UK into taxpayers and tax dodgers. I think that their policy is to abolish the remittance basis altogether after a certain period of residence in the UK. Inviting resident non-domiciles to pay up or pack up is not in the interests of UK competitiveness and fails to recognise the major contribution that resident non-domicile individuals make to the UK economy. We have made it clear that we will retain the remittance basis, and the changes we are making are precisely to ensure that the remittance basis remains sustainable in the long run. By making it a more fair and transparent system, we believe that that sustainability is very much improved.
The hon. Member for Taunton also criticises the number of Government amendments that have been tabled. It is clearly a large number, but he did, in the earlier debate, indicate that often we cannot win when we seek to make changes to an original proposal. Draft clauses having been published in January, we then received representations on the detail of the draft, made changes to the draft, and made further changes after further representations. We sought throughout the whole of that process to ensure that we arrive at the right outcome. I believe that we have now done that.
The 12 Government amendments arise from discussions with representative bodies and interested parties since the publication of the Bill. I can assure the Committee that the issues raised by the British-American Business Council will be fed into discussions with the US on the double taxation treaty.
In quick response to the early questions about what has happened since the publication of the legal advice that we had earlier this year, there has been a number of informal discussions between HMRC and the IRS, the American tax authorities, to ensure that what we sought to achieve and the legal advice we had received and published was accurate. Legal advice is often open to interpretation. We did not want to go forward with a set of proposals that might have been interpreted differently by the American authorities. That is why the changes we have made have been brought forward. We will continue to keep an open ear to the concerns that the British-American Business Council may have.
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