Finance Bill

Public Bill Committee, 10 June 2003.

Standing Committee B

(Except clauses 1, 4, 5, 9, 14, 22, 42, 56, 57, 124, 130 to 135, 138, 139, 148 and 184 and schedules 5, 6, 19 and 25, and any new clauses and schedules tabled by Friday 9th May 2003 relating to excise duty on spirits or R&D tax credits for oil exploration.)

Gerry Sutcliffe (Labour, Bradford South)

I beg to move,

That the Programming Order of 15 May, as amended by the Order of 5 June, be further amended by the substitution for the Table in paragraph (2) of the following Table:—

TABLE Proceedings Time for conclusion of proceedings Clauses 2, 3, 6 to 8, 10 to 13 and 15 to 19, Schedule 1, Clauses 20, 21 and 23, Schedule 2, Clauses 24 to 41, 147 and 149 to 151, Schedule 26, Clauses 152 to 154, Schedule 27, Clauses 155 and 163 to 166, Schedule 30, Clause 167, Schedule 31, Clause 168, Schedule 32, Clause 169, Schedule 33, Clause 170, Schedule 34, Clauses 171 and 172, Schedule 35, Clause 173, Schedules 21 and 22 5 pm on Thursday 22nd May Clauses 43 to 49, Schedule 3, Clause 50, Schedule 4, Clauses 51 to 55 and 58 to 62, Schedule 7, Clauses 63 to 68, Schedule 8, Clauses 69 and 70, Schedule 9, Clauses 71 to 78, Schedule 10, Clause 79, Schedule 11, Clauses 80 to 91, Schedule 12, Clauses 92 and 93, Schedule 13, Clauses 94 to 99, Schedule 14, Clauses 100 to 104, Schedule 15, Clause 105, Schedule 16, Clauses 106 to 115, Schedule 17, Clauses 116 to 123, Schedule 18, Clause 125, Schedule 20, Clauses 126 to 129 5 pm on Tuesday 10th June Clauses 136, 137 and 140, Schedule 23, Clauses 141 and 142, Schedule 24, Clauses 143 to 146 and 156 to 158, Schedule 28, Clauses 159 to 162, Schedule 29, Clauses 174 and 175, Schedule 36, Clauses 176 and 177, Schedule 37, Clauses 178 to 180, Schedule 38, Clause 181, Schedule 39, Clauses 182, 183 and 200, Clauses 185 to 192, Schedule 40, Clause 193, Schedule 41, Clauses 194 to 197, Schedule 42, Clauses 198, 199 and 201 to 213, Schedule 43, Clause 214, new Clauses, new Schedules, any remaining proceedings on the Bill.5.00 pm on Tuesday 17th June

David Wilshire (Conservative, Spelthorne)

Our objections in principle to the programming of this and all other Committees still stand. That said, I am grateful that it has been possible to take a pragmatic approach in order to work within the programming. On that basis, I fully support the motion proposed by the Programming Sub-Committee.

Question put and agreed to.

John McWilliam (Labour, Blaydon)

With the knife moving, I will have to change the selection list.

Clause 55 - Amount of tax chargeable: general

Paul Boateng (Labour, Brent South)

At the end of the previous sitting, I had begun to address the wide range of points made by hon. Members on clause 55. As I said, the clause sets out the main rate of charge for stamp duty land tax, which will apply from implementation. In all respects, it is the same as existing charge under stamp duty, except that we propose to increase the zero-rated threshold for commercial and mixed-use property from £60,000 to £150,000.

I know that some Members were incredulous that a modernised tax could incorporate the existing slab system for charging stamp duty. Since consultation for a modernised stamp duty was first announced in the Budget 2002, we have always made it clear that changes to the main rate structure should be outside the scope of the consultation. That was a deliberate decision in order to focus discussion on fundamental issues such as scope and administration. In addition, we have held rates at a stable level since March 2000. Once we have implemented a regime that addresses the current level of avoidance in the commercial sector, and once the new system has generally begun to bed down, it may be appropriate to examine the structure of the main charge.

There is a further important point, which is that rates for stamp duty, as for other taxes, are announced in the Budget, with any changes being implemented straight away. As we always planned for the new regime to be implemented at the end of this year, we were concerned about the impact of announcing a change too far in advance. I am far from convinced that continuing with the existing structure is as much at odds with the modernised regime as has been suggested.

I shall consider the charge, which is entirely wrong, that the modernised regime promotes avoidance, which we are trying to tackle. The hon. Member for Hertford and Stortford (Mr. Prisk) referred to

''stories of people who have transferred curtains and carpets for large amounts of money unrelated to their genuine value.''—[Official Report, Standing Committee B, 5 June 2003; c. 391.]

Let me make it plain—hon. Members will appreciate this—that the hon. Gentleman described not avoidance but evasion, which is entirely unacceptable under the current regime, and it will continue to be unacceptable under the new one. The avoidance that we are tackling almost entirely involves transactions for consideration way in excess of the £500,000 top threshold. For such transactions, the choice between a slab, slice or some other system with thresholds no higher than £500,000 would have very little impact.

Mark Prisk (Conservative, Hertford and Stortford)

The Chief Secretary raises an aspect that I mentioned when the Committee last met. What does he say to the many outside bodies, particularly the Council of Mortgage

Lenders, which states categorically that the existing slab effect creates incentives for tax avoidance?

Paul Boateng (Labour, Brent South)

I hear what that organisation says but I am unable to accept its argument, because the slab system was also charged with distorting relative house prices and thus influencing the mobility of labour. That is a weighty burden for stamp duty on its own. Many other factors determine relative house prices, both within the same market and across regions throughout the country. Wealthy areas with more expensive properties sit side by side with those with less expensive properties. London and the south-east do not have a monopoly on higher price properties.

To respond to a point made by the hon. Member for Huntingdon (Mr. Djanogly), who is not present—[Interruption.] Oh, there he is. He had his head down. I give him a warm welcome. How could I possibly have overlooked him? He made the interesting point that London has many wards that qualify for disadvantaged area relief—indeed, the whole of Newham and all but one ward in Hackney. Furthermore, since the relief began in November 2001, some 20 per cent. of claims for disadvantaged area relief relate to property in London and the south-east. I do not want to try your patience, Mr. McWilliam, by straying into clause 57, which already stands part of the Bill. Nevertheless, the Committee will take the point.

John Burnett (Liberal Democrat, Torridge and West Devon)

The Chief Secretary must concede that the slab system distorts prices when you reach a fresh band. He is right to deprecate evasion, as we all do. However, when you get to the first band of £60,000, chattels may be passed to make good what vendors perceive as price losses. Distortion in the housing market is evidenced by the fact that the stamp duty office calls in certain transactions at band levels just to monitor the evasion that probably takes place, which would be eliminated if we had a different system.

John McWilliam (Labour, Blaydon)

Order. Before I call the right hon. Gentleman to respond to that intervention, may I remind hon. Members that if they refer to ''you'' they refer to me? I assure the hon. Gentleman that I paid considerably more than £60,000 for the last house that I bought. I should add that I did not pay the top rate of stamp duty.

I also take this opportunity to remind hon. Members that we have a great deal of work to do today. Therefore, can we crack on and try to get through it?

Paul Boateng (Labour, Brent South)

It cannot be denied that the cliff edge that is inherent in the slab system can be somewhat discretionary. I do not wish to dwell on the point. I understand it and shall come back to it later.

The mobility of labour is influenced by many factors, but the actual house price differential is likely to be much more of an influence than the cost of moving. Indeed, a survey in The Economist only last week concluded that the UK has extremely low costs for buying and selling houses of some 4 to 5 per cent.

for estate agents, lawyers and duty, whereas in most of Europe and America the costs are at least 10 per cent.

Even so, in order to ensure that stamp duty does not inhibit an employer from moving key employees, we propose in clause 59 an entirely new relief to eliminate any intermediate charge when the employer facilitates a house sale. I accept the point made by the hon. Member for Torridge and West Devon (Mr. Burnett) that cliff edges inherent in the system can be somewhat discretionary. Our ultimate aim is to reduce such distortions, so we will continue to consider the issue, but that cannot be done before the new system has bedded down.

We have also indicated that we are willing to examine in detail the scope for differential rate structures for the commercial and residential markets, and we have already shown our commitment to supporting smaller businesses investing in commercial premises with our proposal to raise the zero-rate threshold to £150,000 for commercial property and mixed-use property such as live-work units. I am grateful for the welcome given by the hon. Member for Hertford and Stortford. Not surprisingly, the British Property Federation and others echo his support. However, a radical change from the slab system must necessarily result in a dramatic reduction in yield, or in higher rates, hence the silence on that issue from some Members—

Mr. Prisk rose—

Paul Boateng (Labour, Brent South)

I do not mean to provoke. Surely my point is taken. I want to crack on.

Under the slab system, the stamp duty on a purchase of a £200,000 house is £2,000. Under the first proposal of the Council of Mortgage Lenders it would be £4,250, and under the second proposal it would be £2,800. Clearly, there is some interesting arithmetic. However, before the British Property Federation and the Royal Institution of Chartered Surveyors jump up to protest about a 5 per cent. top rate, let me say that that serves only to emphasise that it is entirely sensible for us to put off consideration of a new structure until the new system has bedded down, avoidance has been addressed and we are ready and able to consider differential structures.

Hon. Members have mentioned the report by the Council of Mortgage Lenders. I appreciate the argument contained in that report, which acknowledges a conflict between maintaining revenues and not increasing rates if the stamp system is done away with. It makes a number of proposals, such as a revenue-neutral change of structure including a zero-rate band of £115,000 and a 5 per cent. rate on amounts in excess of that. All those proposals are interesting.

I want to make a number of brief points arising from last Thursday's debate. There was an accusation that people selling their homes would not be interested in the introduction of e-business one way or the other. I really cannot accept that. There is a great deal of interest in the proposal and the benefits that it might bring.

I have also been asked several times about the predicted yield for the new regime. That is set out in the Red Book. For the current year, we forecast a yield of £140 million. That is primarily from the anti-avoidance measures in last year's Finance Bill. For the next year, which is the first full year of the new regime, we forecast a yield of £350 million, of which £210 million will arise from anti-avoidance measures. The remaining £140 million is the net effect of additional yield on leases and the cost of new reliefs in the Bill. In 2005–06, we forecast a yield of £450 million, of which £290 million will arise from anti-avoidance measures.

It has also been suggested that, far from being about modernising, the new regime is about raising revenue. We make no apology for that. We have always stressed that we intend to achieve fairness by addressing avoidance. However, by its very nature, addressing avoidance creates a yield. My right hon. Friend the Paymaster General has made that point time and time again to Committees over many years. I would have thought that the truth should have begun to sink in by now.

I was also asked about the number of businesses benefiting from the differential zero-rate band threshold and the increase from £60,000 to £150,000 for non-residential property. Our estimates are that 18 per cent. of non-residential purchases—about 20,000 annually—and 60 per cent. of non-residential leases—about 15,000 annually—will benefit from the change. I note what has been said about the threshold still not being high enough, but my right hon. Friend the Chancellor noted in his Budget speech that he would continue to consider the proposal of the new threshold. I hope that what I have said about examining structure serves only to support that.

The hon. Member for Hertford and Stortford asked about the number of commercial transactions that will be worse off under stamp duty land tax. Since we are, as I have said, keeping the main rate structure the same, the only freehold transactions that will be worse off will be those that currently avoid paying any stamp duty. Even some of those will not be worse off because business investors in property in any of the 2,000 enterprise areas will benefit, thanks to the change introduced on Budget day of a complete exemption from stamp duty, together with a whole host of other schemes to support enterprise that the Government have introduced. Of course, as the hon. Gentleman has said, the lease duty structure creates higher bills for larger businesses with long and valuable leases, although that is beyond the scope of this clause, within which I am anxious to remain. Even allowing for those paying more in lease duty, in total, gainers outnumber losers by two to one.

All in all, to continue with the existing rates through the implementation period is an entirely sensible proposal. I know that there were some probing questions on lease duty last Thursday. Perhaps those arise more naturally in relation to clause 56 and schedule 5, which have already been ordered to stand part of the Bill, so I do not want to go there, especially given the necessarily lengthy response on clause 50. I hope that, with those assurances and the clarification

that I have been able to give, the clause will find favour with the Committee.

Mark Prisk (Conservative, Hertford and Stortford)

I am aware of time, so I shall respond briefly to the Chief Secretary. As I said at the beginning, I welcome the fact that the Government have recognised the distinction between the residential and non-residential markets. However, from this debate we now have the admission, despite what was said in the early consultation document, that the Government make no apology for raising additional revenue, although we were told that the measure was all about reform, not raising revenue. That is an important admission.

We have had from the Chief Secretary a rather vague promise that when the measure has settled down, in due course, at some point in the distant future when he has moved on—to higher things, of course—we will reconsider it. If I may say so, that is rather feeble. After all, the professional bodies in all the submissions that I have seen have said that their feeling is that this is the most antiquated and unfair aspect of the whole duty, which the Chief Secretary claims to seek to reform and modernise, yet there it is, set out in clause 55, unchanged, unmodernised and unreformed. As all professional outside bodies recognise and as the Chief Secretary himself has said, this aspect not only promotes tax avoidance but encourages tax evasion, which my party strongly opposes. We were therefore hoping that the Government would reform it. For those reasons we are deeply disappointed by the structure set out in the clause, and we will oppose it.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 17, Noes 6.

John McWilliam (Labour, Blaydon)

May I ask hon. Members to remain quiet when we are taking the call for the vote because we would not want to do an injustice by getting it wrong unnecessarily.Clause 58 PART-EXCHANGE OF RESIDENTIAL PROPERTY

Clause 58 - PART-EXCHANGE OF RESIDENTIAL PROPERTY

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 199, in

clause 58, page 38, line 11, leave out paragraph (a).

John McWilliam (Labour, Blaydon)

With this it will be convenient to discuss the following:

Amendment No. 190, in

clause 58, page 38, line 12, leave out

'that has a market value in excess of the market value of the old dwelling'.

Mark Prisk (Conservative, Hertford and Stortford)

I was remiss in not welcoming you to the Chair this morning, Mr. McWilliam. Please accept my apologies. It is a great pleasure to serve under your leadership.

The amendments relate to subsection (1). Clause 58 provides specific rules for house-building companies to acquire dwellings in part-exchange for the disposal of a newly constructed dwelling. Subsection (1) spells that out and states:

''Where a dwelling . . . is acquired from an individual (whether alone or with other individuals) by a house-building company or a company connected with a house-building company, the chargeable consideration for the acquisition is taken to be nil if . . . ''

It then sets out five conditions. The first is that

''the individual . . . acquires from the house-building company a new dwelling that has a market value in excess of the market value of the old dwelling''.

That is a peculiar value judgment. An elderly couple who wanted to move to a smaller, more easily maintained home would be specifically excluded from the relief, but a wealthy family building a mansion would have the transaction exempted. Why are the Government against trading down? Do they not recognise that that would unfairly disadvantage the sheltered housing market? Older people trade down in size and value, and release a larger family home for those with a growing family. What is the logic of exempting one form of part-exchange and not another? How is that fair?

The purpose of the amendments is to question the Government's logic and to ask the Chief Secretary to explain briefly the thinking behind the provision. If he can provide a satisfactory answer that suggests that the Government are aware of the problem and willing to address it, we shall consider withdrawing the amendment, but we wait to hear his reply.

John McWilliam (Labour, Blaydon)

Order. I caution hon. Members that if they intend to withdraw an amendment, they should do so only after the Minister has replied because, strictly according to the Standing Orders, I should put the question to the Committee immediately.

Paul Boateng (Labour, Brent South)

Amendment No. 190 would remove part of subsection (1)(a), which requires that the new dwelling has a higher market value than the old dwelling. Clause 58 currently preserves the benefits that house builders enjoy under stamp duty by using the single sale route. Under stamp duty, the acquisition by the builder will be free of stamp duty only if it is of lesser value than the property being exchanged. However, it will bring some comfort to the hon. Gentleman to know that we have received a number of representations asking for the requirement on market value to be dropped. It has been said that the change, which amounts to a new relief, would help companies that provide part-exchange arrangements to older people, as the hon. Gentleman outlined. It is

not uncommon for older people to downsize their housing arrangements later in life. People may move into retirement properties that are smaller and less valuable than their existing homes. If a builder is willing to take the existing home in part-exchange, we are sympathetic to the proposition that the relief should still be available.

If an ageing couple wanted to move from a £400,000 property to a £200,000 property and the builders were willing to take their existing property and make an equality payment of £200,000, that situation would not qualify for the relief under the clause. We believe that it should. Unfortunately, the drafting of the amendment may be defective, because it has been proposed without a consequential amendment to subsection 1(d). That subsection requires other consideration to be given by the individual for the acquisition of the new dwelling. If the new dwelling were less valuable than the old one, that would not be the case. The house builder would be expected to supply other consideration, presumably a cash equality payment representing the shortfall between the value of the old dwelling and the new one.

I therefore ask the hon. Gentleman to withdraw amendment No. 190. In return I can confirm to the Committee that we shall table an amendment on Report to ensure that downsizing qualifies for the relief. That will make it a more generous relief than is currently obtainable under stamp duty, which is another part of the modernising process. In the example just given, the chargeable consideration would be £200,000, so the charge would be £2,000. Under stamp duty, even using the single sale route, a situation would exist in which a consideration could not fall below £400,000, leading to a charge of £12,000.

That generous relief shows that the Government have listened and will continue to listen to representations such as we have had in relation to the relief. Of course, not all builders are in a position to conclude exchange deals with downsizers, because a builder will have to pay the difference in values. Not all builders have the necessary funds, so they may ask a third party relocation company to buy the old dwelling instead. That is not an exchange, so it does not naturally fit into the clause: it is more a matter for clause 59, which deals with relocations and which we will come to in due course. Suffice to say, at this stage, the expansion of the relief in clause 59 may also be necessary to assist relocation companies that deal with older people. We will consult on that and bring forward amendments before implementation.

Amendment No. 199 to clause 58 goes further than amendment No. 190. It would remove altogether the requirement for a new dwelling to be given in exchange for the old one. That would entirely change the character of clause 58, so it would become a blanket relief for house builders acquiring land that is currently used for dwelling. The amendment would not leave the relief particularly well targeted, which does not speak well of it, and does not attract us to it.

Clause 58 is intended to mitigate the reform of the treatment of exchanges. If the amendment were to be accepted, there would not need to be an exchange for the relief to be available. I do not think that was the

intention of the amendment. Apart from the policy argument, the amendment would leave the clause deficient, as I am sure the hon. Member for Hertford and Stortford appreciates. I am not able to accept that amendment for the reasons given, but I am sympathetic to the aims of amendment No. 190.

John Burnett (Liberal Democrat, Torridge and West Devon)

Will the Chief Secretary give way?

Paul Boateng (Labour, Brent South)

Unless the hon. Gentleman is suggesting that I should not follow that course, I shall not give way, because we need to make some progress. I ask the Committee to reject the amendment, given the undertaking that I have made to return to the matter on Report.

Michael Jack (Conservative, Fylde)

I welcome what the Chief Secretary has had to say, and particularly his understanding and acknowledgement of the effect that the clause would have on elderly people. My constituency contains a large amount of the sheltered accommodation to which the amendment and clause apply, and what he has said will be welcomed. I noted the point that he made about third party acquisitions in clause 59, so I shall not say anything about that at this stage.

While the right hon. Gentleman is in redrafting mode, I suggest that he carefully considers the impact of the proposal in respect of the new stand duty payments, as I am sure he has had representations from companies, such as McCarthy and Stone, that are in the business of building sheltered accommodation for the elderly. An illustration was supplied of a property that had a sale price of £150,000 and a leasehold length of 125 years. Under the old system, with a ground rent of £350, stamp duty payable would have been £1,585. Under the new proposals, that would have dropped to £1,500, but with a marginal increase in ground rent of up to £500, figures of £1,620 and £2,100 would prevail. I appreciate that that is not exactly what the clause is about, but I am presuming on the generosity of the Chief Secretary, and hoping that when he considers the position of the elderly buying sheltered accommodation with a structure that could involve two bites of the new tax cherry, he will re-examine with sympathy the problem that I have illustrated.

Several hon. Members rose—

John McWilliam (Labour, Blaydon)

Order. I am re-examining with sympathy the way in which this debate is going. It strikes me that we are dealing with clause stand part now, especially given what the Chief Secretary has said. That is how I am going to treat the amendments and the clause.

John Burnett (Liberal Democrat, Torridge and West Devon)

I am grateful for the Treasury's rethink on this matter. Of course, the relief is limited to a new dwelling acquired as the person's only or main residence. We referred to equality money when we discussed partitions. Although the Chief Secretary referred to it when he spoke, I should be grateful if he would outline again for the Committee, very briefly, the stamp duty treatment of equality money on a downsizing operation.

Jonathan Djanogly (Conservative, Huntingdon)

I am pleased to be able to speak to the amendment, and happy to

hear the Chief Secretary's agreement with the overall theme behind amendment No. 190 on part exchanges of residential property, particularly in relation to elderly people downsizing their properties. Elderly people may wish to release equity to live in their retirement, or cash to give to their families to avoid unnecessary inheritance tax, or perhaps a little of both. They may be concerned to reduce the cost implications of long-term residential care. For all those reasons, there are serious policy issues and I am pleased to hear that the Government take an interest in the amendment. I also note that, as it stands—I was going to make a particular point about this—the clause is more of a yuppie exemption than anything else, so I am pleased that we are now considering pensioners, at the other end of the scale.

As the Chief Secretary said, amendment No. 199 takes the concept of the exemption somewhat further. Why should it apply only to house-building companies? I take his point that the amendment strikes beyond the meaning of the clause, but there are policy issues involved, and as we are dealing with the stand part debate I should like to raise them now. There is a big problem, mentioned by the Chancellor in his speech yesterday, with the lack of liquidity in the housing market. Many elderly and single people in this country are living on their own in large houses. Many would be happy to downsize, and there is no doubt that one reason why they do not do so is that they are put off, to a greater or lesser extent, by the amount of stamp duty that they would have to pay when buying their downsized home.

Rob Marris (Labour, Wolverhampton South West)

Will the hon. Gentleman give way?

John McWilliam (Labour, Blaydon)

Order. Before the hon. Member intervenes, may I say that it was remiss of me not to point out that it is warm this morning, so hon. Gentlemen may remove their jackets?

Rob Marris (Labour, Wolverhampton South West)

Can the hon. Gentleman give some evidence for his assertion that people who wish to downsize are inhibited by stamp duty?

Jonathan Djanogly (Conservative, Huntingdon)

I have no empirical evidence, but many constituents have complained to me about stamp duty, and have said that it is one reason why they do not wish to move homes.

Why not extend the concept in the clause to other part exchanges? For example, if it enabled people to move within a particular radius of their current home, it would assist a fluid housing market while not encouraging even more southward migration in this country. I am not presenting a thoroughly worked-out concept, but the Government could have been more constructive in their modernising approach to stamp duty. We need to put that in the context of the Chancellor's announcement on the euro yesterday. The Chief Secretary may want to mention that in his response. Stamp duty was raised as an issue in relation to house prices, and the Chancellor said that we need a speeding up of the supply of houses. To many, including myself, that meant that more houses will be built in the south of England.

Can we not be a little smarter than that? If we want more homes to be available and a more liquid labour

market where people move between homes, instead of covering the south in concrete why not aim to use stamp duty exemption on part exchanges as a way of making better use of existing housing stock before we have to build more houses? I would appreciate the Chief Secretary's views on that point.

Mark Prisk (Conservative, Hertford and Stortford)

I understand that you wish to concertina the debate Mr. McWilliam, and I appreciate that.

John McWilliam (Labour, Blaydon)

Order. I have no interest in concertinaing the debate. It is just that the way in which hon. Members were continuing the debate makes it obvious that we are dealing with the whole clause.

Mark Prisk (Conservative, Hertford and Stortford)

Thank you, Mr. McWilliam.

I welcome what the Chief Secretary has said. It is to be commended that the Government are being responsive. He can see the essence of our argument; there is an iniquity in helping those who wish to trade up but not those who wish to trade down. The Chief Secretary has particularly recognised that that could hurt those who are retired, or facing retirement, who may wish to trade down, and he wants to make the market operate more effectively. To that end, and given what the Chief Secretary has promised, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of the debate on the amendments proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 69, That the clause stand part of the Bill.

Question agreed to.

Clause 58 ordered to stand part of the Bill.

Clause 59 - Relocation relief

Mark Prisk (Conservative, Hertford and Stortford)

This is another clause needed because of the earlier decision by the Government to scrap subsale relief on a general basis. Under the clause, relocation relief has been promoted. That operates on the basis that where an employer will offer to purchase an employee's current residence to enable staff to relocate, that transaction would be exempt from charge. The idea is not to inhibit the transferral of employees around the country, particularly where employers are willing to pay for the move and believe it to be expedient. That is a very important part of the principle of the free movement of labour.

There have been several representations on the matter. The Law Society has pointed out that the clause applies only to a narrow number of relocation companies, a point on which the Chief Secretary touched. I draw the Committee's attention to subsection (5). I will not read it, given the time that we have left. A number of companies supply services

similar to those of relocation companies, but they would not satisfy the definition as set out in subsection (5). I shall cite a couple of examples.

Some house builders specialise in retirement homes. They outsource their part-exchange schemes so that what really occurs is not technically a part exchange. As a result of house builders not wishing to tie up resources in part-exchange transactions, the outsourcing company would act in the same way as a relocation company that falls within the remit of the clause. However, the relocation would not occur as a result of a change of employment, and the relief would not therefore be available.

A second example is the situation in which companies become involved as what are known in the market as chain breakers, in which a chain of transactions is in danger of collapsing without the intervention of such enterprises. That intermediary activity, which under the present regime is embraced by the general subsale relief, is a very important service. It provides liquidity to the market and helps with mobility. Will the Chief Secretary explain the basis for defining the relief as he has, and does he accept that modern commercial practice, which he says is the basis of the reform, should in fact take account of those different organisations?

Michael Jack (Conservative, Fylde)

My hon. Friend rightly pointed out that the Chief Secretary had alluded to the clause as the place at which the Government might have something more specific to say about so-called third-party exchange mechanisms. McCarthy and Stone, which is a major provider of private sheltered accommodation, uses precisely such a mechanism. The third party, while not becoming the owner of the part-exchange property, effectively completes the process up to the exchange of contracts, then acts as an intermediary before completion of the sale. Obviously, that has several advantages, in that it facilitates the sale and breaks chains, as my hon. Friend said. It also takes from an elderly person, for whom a move may be a traumatic enough experience at the best of times, the difficulty of disposing of their property.

As I understand it, the way in which the new tax will operate will give two bites of the tax cherry. If that type of property sale is not exempted from the proposals, one lot of duty will be payable by the third-party company and another lot will be payable once completion occurs. That was not the Government's intention, if my understanding is correct. Given the Chief Secretary's helpful allusion to a possible concession on Report, I press him to be entirely clear about the Government's intentions.

John Burnett (Liberal Democrat, Torridge and West Devon)

I am grateful to Ms Linda Wilson, who is a partner of Wards Solicitors, and to the Law Society and other organisations for raising the matter, which boils down to the narrow definition of relocation company in clause 59(5). I hope that the Chief Secretary, having heard the arguments put by other members of the Committee, will consider that it would be wise to make the definition less restrictive.

Not only do chain-breaking schemes help the smooth running of the housing market but other

companies that work in conjunction with house builders that specialise in retirement homes outsource their part-exchange schemes to clients and others. Generally, that is still referred to as part exchange, even though the two companies involved are not connected. In fact, it is a substitute for the house builder itself becoming involved in the process. I hope that we can have a more generous definition of a relocation company than the narrow definition in clause 59(5).

Paul Boateng (Labour, Brent South)

As has already been discussed, a general form of successive subsale transfer relief will not be carried forward in the stamp duty land tax. This clause is the first of three clauses intended to mitigate the abolition of subsale relief in specific circumstances. The relief in clause 59 will provide a useful benefit for companies that specialise in relocation services for employees and for employers who need to move key staff at short notice. It will also mean that employees will not have to worry about the sale of their house at what may be a stressful time for them.

Several people, as well as some hon. Members, have queried why the clause covers only relocation of employment and not other forms of relocation. In particular, the Government have received representations from organisations providing relocation services to older people moving into retirement accommodation. The hon. Member for Torridge and West Devon referred to chain-breaking companies, which buy land from individuals where the alternative would be a chain of property purchases falling apart.

We have already discussed companies that provide services to older people, which relates to clauses 58 and 59. Some house builders may not be able to make a cash payment to their older clients to cover the difference in price between the retirement property and the previous dwelling, and they may out source the acquisition of the previous dwelling to another company that specialises in acquiring and moving on such property. Because there is no exchange, such a situation is not covered by clause 58, but it is covered by clause 59—our solutions encompass clauses 58 and 59.

I can provide some comfort to the hon. Members who have raised the issue of chain-breaking companies. I can confirm that we will consult with bodies in the sector and will table appropriate amendments to clause 59 before the implementation of the modernised regime to ensure that chain-breaking companies can operate without a double charge to stamp duty land tax. A relief for this specific point would assist liquidity in the housing market, which we all agree is desirable. The Office of the Deputy Prime Minister has already issued a paper making the promotion of chain-breaking companies a Government policy.

In the light of that explanation, I hope that Members will give the clause a fair wind.

Question put and agreed to.

Clause 59 ordered to stand part of the Bill.

Clause 60 - Compulsory purchase facilitating development

Mark Prisk (Conservative, Hertford and Stortford)

The Chief Secretary will know that the Planning and Compulsory Purchase Bill is being considered today on the Floor of the House. Given that the Bill seeks radically to alter both the operation of and the valuations for compulsory purchase, which clause 60 addresses, can he tell the Committee what discussions have taken place between the Inland Revenue and the Office of the Deputy Prime Minister concerning the new compulsory purchase arrangements?

Paul Boateng (Labour, Brent South)

The double hit problem does not apply when a local authority acquires land for development by itself because the authority does not need to pass the land on to anyone else. There is no general relief for local authorities save where they are acquiring land as part of a statutory reorganisation, which is dealt with in clause 66.

One might ask why the relief is available even if the land is acquired by agreement rather than by the order being enforced. We considered that question, but took the view that it would be onerous to require an authority to go through the statutory procedures to enforce an order to get the relief when the landowner is willing to execute a voluntary transfer.

The relief works for all types of compulsory purchase under all statute. The clause relieves the charge on the local authority and therefore the double hit on the developer. Paragraph (3) extends the relief to a voluntary transfer agreed between the developer and the landowner, where the landowner voluntarily transfers the land to the local authority. That will not happen frequently in practice because in a voluntary settlement the developer usually asks the landowner to transfer the land directly to them. The relief applies only where the developer is a person other than the acquiring authority. Where the developer is also the acquiring authority, no relief is available because the double hit problem does not arise.

The clause will relieve a problem that would increase the costs of development in the early stages, and I hope that it is attractive to the Committee. We are discussing the matter with the Office of the Deputy Prime Minister, and the clause does not refer to particular legislation and will work with the new regime. Given the Committee's general sense of good will towards the clause, given its objectives, I hope that it will stand part of the Bill without further debate.

Question put and agreed to.

Clause 60 ordered to stand part of the Bill.

Clause 61 - Compliance with planning obligations

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I beg to move amendment No. 278, in

clause 61, page 42, line 11, at end insert—

'Local Health Boards established under section 16BA of the NHS Act.'.

John McWilliam (Labour, Blaydon)

With this it will be convenient to discuss the following:

Amendment No. 82, in

clause 61, page 42, line 25, at end insert 'National Park Authorities'.

Amendment No. 279, in

clause 66, page 46, line 7, at end insert—

'Local Health Boards established under section 16BA of the NHS Act.'.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

These are fairly straightforward probing amendments that will cause fewer theological disputes in Committee. Clause 61 provides for an exemption to stamp duty land tax where a land transaction has been conducted in order to comply with a planning obligation provided that the purchaser is one of a number of public authorities listed in paragraph (3). The amendments seek to probe why the list does not include the newly constituted local health boards, which were established under the Health (Wales) Act 2003, and the national park authorities in England and Wales. I am confident that the Chief Secretary will confirm that local health bodies are included under the aegis of the National Assembly for Wales. Provided that such a confirmation is available, I should like to concentrate on the national park authorities.

The clause is centred on so-called section 106 agreements by which developers agree to provide certain public goods—affordable housing, public amenities and recreational and community facilities—in return for the granting of a planning consent. Developers have long viewed the costs associated with those types of agreements as a kind of informal planning tax—hence the proposal to avoid double taxation by exempting the planning gain aspect of a development from the new stamp duty land tax where the purchaser is a public authority.

Most of the bodies listed under the heading ''local government'' are planning authorities. By and large, the local planning authority benefits from a section 106 arrangement because it provides the planning consent in return for the agreement. Under the Environment Act 1995, all national park authorities in England and Wales are the principal planning authorities for their areas. The Brecon Beacons national park is in my constituency, and the hon. Member for Torridge and West Devon has a national park in his constituency. Why are the national park authorities the only local planning authorities to be omitted from the list? I suspect that the answer is that the local authorities in those areas are still eligible under the clause to benefit from section 106 agreements. The national park authority could essentially negotiate a section 106 deal with a developer—if a local school were to be developed off-site, the local education authority would be the beneficiary.

There may be situations in which it would be permissible and desirable for the national park authority to be the beneficiary. The national park authorities have developed a more expansive role under the terms of the 1995 Act because local human

settlements play a more important part in their interpretation of sustainable development. For example, the provision of a public open space, a visitor centre or an educational centre directly related to the national park would probably fall under the remit of the national park authority. In those circumstances, it would be reasonable to allow the national park authorities the same tax treatment as other public authorities in similar circumstances.

The amendment is drafted as a probing amendment. If it were properly drafted, it would also refer to the broads authority and to the Scottish national parks authorities, which under the terms of the National Parks (Scotland) Act 2000 also exercise planning functions. I always look forward to the Chief Secretary's remarks and am particularly interested to hear his comments on this matter.

John Burnett (Liberal Democrat, Torridge and West Devon)

I am grateful to the hon. Member for East Carmarthen and Dinefwr (Adam Price) for raising the matter. I am afraid that I do not know whether there is a lacuna. If there is, the law must be changed. I cannot remember a section 106 agreement being entered into by Dartmoor national park, or any national park. I presume that that is because their agents—West Devon borough council or whichever district council is involved—do that on their behalf. That said, there could be other agreements, to which the hon. Gentleman referred, that should be covered by the exemption. The national parks should enjoy the same tax treatment as other local authorities. I, too, look forward to hearing the Chief Secretary's comments on this important set of amendments.

Paul Boateng (Labour, Brent South)

This is an important set of amendments. I find the arguments in favour of them compelling. Clause 61 provides for relief when developers are required under a planning obligation to transfer land to one of a list of prescribed public bodies. That prevents a public body from being liable for tax on any consideration given—a cost that would normally be passed back to the developer. There is a power for the Treasury to add to the list of public bodies by statutory order.

Clause 66 provides a general exemption from stamp duty land tax when the land is transferred between public bodies under statutory reorganisation. It gives the Treasury a power to exempt by statutory order other land transfers made under statutory authority when either the purchaser or the vendor is a public body.

Amendments Nos. 278 and 279 are intended to add Welsh local health boards to the list of public bodies in each clause. I accept both amendments, which reflect the changes in the organisation of health provision in Wales. The timing meant that we were not able accurately to reflect those changes in the list in clauses 61 and 66. The delegation of health provision in Wales to local health boards since 1 April is mentioned in the amendment. It seems logical that the boards should enjoy the same relief under the clause as would have been enjoyed had the delegation not taken place.

I pay tribute to the work of the national park authorities. They seem to do a good job. Every Committee member has had, at some time, an

opportunity to enjoy the fruits of that work—sometimes literally—and would want to see it furthered. The national park authorities are generally the sole planning authority for the area under their jurisdiction, making them important players in any development. The examples of the school and visitors centre given by the hon. Member for East Carmarthen and Dinefwr are good. The more I have thought about the matter, the clearer it became that the amendment should be accepted in principle. At the moment, it is technically defective, but we will work on that and bring the change forward in due course and before implementation.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I am grateful to the Chief Secretary and I look forward to seeing the amendment technically spruced up on Report. I am also grateful for what he said about the local health boards. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Rob Marris (Labour, Wolverhampton South West)

The list in subsection (3) does not appear to cover Wolverhampton city council, or Sheffield city council. Will the Chief Secretary confirm whether that is a lacuna, or am I misreading the list?

Paul Boateng (Labour, Brent South)

I would have thought that any provision that did not cover Wolverhampton city council was defective, so I shall certainly take steps to ensure that there is no defect. I am pleased to be able to share with my hon. Friend the fact that for such purposes city councils are district councils. I hope that that is of some comfort and that Wolverhampton is restored to its rightful place. There is no lacuna, and my hon. Friend has done the Committee a favour in drawing attention to that possible ambiguity.

Question put and agreed to.

Clause 61 ordered to stand part of the Bill.

John Burnett (Liberal Democrat, Torridge and West Devon)

On a point of order, Mr. McWilliam. I presume that you want us to discuss clause 62 and schedule 7 separately.

John McWilliam (Labour, Blaydon)

If the hon. Gentleman looks at his selection list, he will see that schedule 7 has been selected separately, and we shall discuss it in due course.

Clause 62 ordered to stand part of the Bill.

Schedule 7 - Stamp duty land tax: group relief and reconstruction and acquisition reliefs

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 192, in

schedule 7, page 169, line 44, at end insert

'other than arrangements for an event falling within one of the cases set out in paragraph 4 below'.

The amendment refers to paragraph 2 on page 169, which provides anti-avoidance rules to restrict the availability of group relief covered by the schedule. It applies when different types of arrangement are entered into relating to the control of companies, the provision of consideration from outside the control or when the vendor and purchaser are to cease being

members of the same group. When such arrangements exist at the effective date of the transaction, group relief is not due. I have received representations, notably from Charles Elphicke of Reed Smith, but also from the Law Society.

In general, relief from stamp duty land tax on the transfer of land between associated companies is withdrawn if the purchaser ceases to be associated with the vendor within a set period. Paragraph 4 recognises that relief should not be withdrawn when the companies cease to be associated by reason of certain non-disqualifying events. However, if at the time the group transfer takes place, there is an arrangement to carry out one of those disqualifying events, relief is not available. That seems unreasonable. The amendment would permit group relief to be claimed when there are arrangements for the purchaser to cease to be associated with the vendor, but those circumstances are not such that would give rise to any clawback of relief under paragraph 3. I trust that that is clear to the Chief Secretary.

John Burnett (Liberal Democrat, Torridge and West Devon)

I hope that it is in order for me now to speak to amendments Nos. 276 and 277, Mr. McWilliam, or would you prefer me to do so later?

John McWilliam (Labour, Blaydon)

We are discussing amendment No. 192.

Jonathan Djanogly (Conservative, Huntingdon)

I support my hon. Friend's comments on the amendment. It seems to me that there has been an error in the drafting, but I am sure that the Minister will elaborate.

Paul Boateng (Labour, Brent South)

Amendment No. 192 would add a proviso to paragraph 2(1) and would permit group relief to be claimed when there are arrangements for a company to leave the group in one of the circumstances detailed in paragraph 4. The amendment is clearly intended to extend the range of circumstances in which group relief can be claimed. It proposes that if any of the conditions in paragraph 4 of the schedule are met when land is transferred intra-group, a claim to group relief under paragraph 2 should be allowed.

I am grateful to Opposition Members for tabling the amendment. My officials have carefully considered the detail and have engaged in a dialogue with the Law Society regarding the interaction between paragraphs 2 and 4 of schedule 7. I am pleased to report that, following that dialogue, the Law Society is happy to accept that in the first and second cases mentioned in paragraph 4, it is extremely unlikely that there will be arrangements for persons to obtain control of the purchaser but not the vendor. It is therefore in agreement that that part of the amendment is unnecessary. However, the situation is different for the third case in schedule 4, which concerns a situation where a claim to group relief interacts with section 75 of the Finance Act 1986.

We recognise that a claim to group relief should not be disallowed where a transfer takes place prior to a demerger for which reconstruction relief under section 75 will be claimed. We will therefore table an amendment on Report to address that point. On the basis that I have made a commitment to address the

substantive point raised, I hope that the hon. Gentleman will withdraw the amendment. We shall return to its substance, as agreed by ourselves and the Law Society, at a later stage.

Mark Prisk (Conservative, Hertford and Stortford)

I welcome the Chief Secretary's comments, and accordingly, given what he has offered, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 191, in

schedule 7, page 170, line 28, leave out from 'transaction' to end of line 30.

This amendment is narrow, but of concern. It relates to paragraph 3, which withdraws group relief if, following a successful claim to group relief, the purchaser ceases to be a member of the same group as the lender within three years of the date of the transaction. Again, I am grateful to the Law Society for its support and advice.

As a matter of current law, where stamp duty relief has been claimed on the transfer of land between companies in a group, the relief is clawed back if the purchaser leaves the group within two years. Paragraph 3 would not only extend the clawback period to three years, but would provide for a clawback made outside the three-year period in pursuance of arrangements made before the end of that period. Having extended the clawback period to three years, to extend further by reference to ''arrangements''—I think that that is the phrase used—seems unnecessary and can only create uncertainty on the possibility of clawback. The amendment would limit the ambit of the paragraph to circumstances in which the relevant company ceases to be a member of the group within three years after the effective date of the transaction.

The amendment stems from advice from outside experts, particularly the Law Society. As with the previous amendment, I hope that the Chief Secretary will be able to be convivial and supportive.

Jonathan Djanogly (Conservative, Huntingdon)

I agree with my hon. Friend. I shall not repeat what he said, but the extension of the clawback period from two to three years seems unjustified, and I will be interested to hear the Chief Secretary's explanation of why it is proposed. The inclusion of the so-called other arrangements means that even a three-year period could be extended.

Briefly, I would like to talk about the general policy issue here, because we are talking about a time in which British manufacturing is in deep recession. It has lost 6,000 jobs in recent times.

Rob Marris (Labour, Wolverhampton South West)

May I point out to the hon. Gentleman that manufacturing is not in deep recession? Figures published yesterday by the Office for National Statistics do not indicate that; in fact, manufacturing in this country grew by 0.3 per cent. in April.

John McWilliam (Labour, Blaydon)

Order. I appreciate the provocation, but we are dealing with schedule 7 and not British manufacturing industry in general.

Jonathan Djanogly (Conservative, Huntingdon)

Thank you, Mr. McWilliam. I shall not specifically address the hon. Gentleman's point for the reasons that you gave. I mentioned the issue because in order to survive, many companies are desperately trying to restructure their assets, which involves them selling assets between group companies. That is exactly what the schedule is about. They will transfer their best assets to the group companies that they want to go forward, and will then look to release those assets that are not taking the business forward. In a tough time, that is what companies have to do. Why, when companies are trying to restructure themselves to survive, are the Government making it harder for them to do so? That is what we are talking about here, and that is why I support the amendment.

John McWilliam (Labour, Blaydon)

Order. May I add a note of caution? We have again gone very wide of the amendment, and the other amendments explore this schedule pretty thoroughly. I am minded not to have a debate that the schedule be the seventh schedule to the Bill.

Paul Boateng (Labour, Brent South)

I am afraid that I must disappoint the hon. Member for Hertford and Stortford—no more Mr. Nice Guy. I am asked why we are increasing the limit from two to three years, and I can tell hon. Members that we are introducing the measure to make avoidance more difficult. Companies might be prepared to wait out two years, but not three. That is the point of the schedule. We oppose the amendment, which intends to remove an anti-avoidance provision. That seems entirely reasonable. Amendment No. 191 seeks to remove paragraph 3(1)(a)(ii) of schedule 7, which provides that group relief will be clawed back if the company that has claimed group relief leaves the group under arrangements entered into during the three-year clawback period. We do not want that paragraph to be removed.

This additional anti-avoidance measure is our response to continued avoidance using special purpose vehicles. We are aware that some groups of companies have been prepared to use group relief to transfer into an SPV with the specific intention of selling it after the end of the clawback period. We do not think that it is right that they should be able to do that for the purpose of avoiding tax. If arrangements have been entered into for onward sale during the clawback period, it is legitimate for group relief to be withdrawn. That type of scheme would represent straightforward avoidance of the clawback provisions, which would not be in line with our fairness agenda. To present that, as the hon. Member for Huntingdon has done in a tone rightly characterised as provocative, as somehow being a legitimate response to prevailing commercial conditions in manufacturing and other sectors, seems completely disingenuous. I urge hon. Members to reject the amendment unequivocally.

Mark Prisk (Conservative, Hertford and Stortford)

As the Chief Secretary says, we have no more Mr. Nice Guy. We enjoyed what was obviously a brief sojourn. Never mind.

I am disappointed by the Chief Secretary's comments. As we read and listen to the evidence presented by outside professional bodies, such as the Institute of Chartered Accountants and the Law Society—esteemed bodies that he would not wish to suggest promote or encourage tax avoidance—we can see that they genuinely believe that the amendment has significant merit. I have to say that the Chief Secretary's reply does not. On that basis, we shall not withdraw the amendment as he has suggested, but shall press it.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 18.

Paul Boateng (Labour, Brent South)

I beg to move amendment No. 252, in

schedule 7, page 173, line 36, at end insert—

'Relief under this paragraph is referred to in this Part as ''reconstruction relief''.'.

John McWilliam (Labour, Blaydon)

With this it will be convenient to take Government amendments Nos. 257 to 264, and Government amendments Nos. 268 to 275.

Paul Boateng (Labour, Brent South)

Amendment No. 252 is the first of a series of Government amendments designed to complete the index of defined expressions set out in clause 122. In consultation, members of representative organisations have been pressed for views on the clarity of the drafting in part 4 of the Bill. The balance of views is that the drafting follows tax law rewrite principles and, given the complexity of some of the material, is relatively—I stress that word—easy to follow. A complete list of defined expressions reflects those principles and provides just a little more clarity. For that reason, we believe that amendment No. 252, and the other 16 designed to achieve the same end, are important. As such, I commend them to the Committee.

Mark Prisk (Conservative, Hertford and Stortford)

On behalf of the Opposition, I welcome the amendment, which is intended to provide clarity.

Amendment agreed to.

John Burnett (Liberal Democrat, Torridge and West Devon)

I beg to move amendment No. 276, in

schedule 7, page 176, line 6, after 'persons', insert 'acting together'.

John McWilliam (Labour, Blaydon)

With this it will be convenient to discuss amendment No. 277, in

schedule 7, page 176, line 7, after 'persons', insert 'acting together'.

John Burnett (Liberal Democrat, Torridge and West Devon)

I tabled the amendment as a result of information briefings from Mike Hardwick of Linklaters, which is a leading City law firm. He is

shortly to take over as chairman of the Law Society's tax law committee. He is an eminent tax lawyer, as is his predecessor as chairman, Mr. Ed Troup, who is well known to the right hon. Member for Fylde (Mr. Jack). The Law Society's committee is now called the tax law committee, but it was called the revenue law committee when I was on it. Perhaps its present name is clearer and more straightforward.

I gave notice of the purpose of the amendments to the Chief Secretary's officials. The amendments are fairly simple, but they relate to far-reaching and important matters. Briefly, as you know, Mr. McWalter, paragraph 7 of the schedule gives relief from stamp duty land tax if land is acquired in pursuance of a scheme of reconstruction. However, the relief is clawed back if the acquiring company undergoes a change of control within three years of reconstruction. The circumstances in which a change of control is regarded as occurring are broadly drawn, with the result that the relief could be clawed back as a result of a small change in shareholdings. That makes the relief of little practical use to quoted companies whose shareholdings fluctuate constantly.

The Chief Secretary does not need me to remind him how important quoted companies are for our economy, for jobs and for our balance of payments. We should seek to help them. I hope that the Chief Secretary will be able to give me encouragement in relation to this matter. I could speak for longer about it, but I know that time is short. As I said earlier, I gave notice of the purpose of these important amendments to the Chief Secretary's officials last week.

John McWilliam (Labour, Blaydon)

May I point out that the hon. Member for Hemel Hempstead (Mr. McWalter) is not a member of this Committee?

Paul Boateng (Labour, Brent South)

I thank the hon. Member for Torridge and West Devon for extending to my officials and me the courtesy of giving us advance notice of his intentions in relation to the amendments, which would ensure that reconstruction relief or acquisition relief will not be withdrawn unless control changes as a result of persons acting together.

Paragraph 9 of the schedule is a complex anti-avoidance provision that aims to discourage companies from using corporate vehicles to avoid stamp duty land tax. Prior to the Finance Act 2002 companies exploited the rules for the partial stamp duty relief for acquisition by using acquisition relief to facilitate moving UK land into a special purpose vehicle to sell the land on within a corporate wrapper. As the hon. Gentleman will recall, we tackled that abuse in the 2002 Act by introducing a provision that clawed back the reconstruction relief already granted where UK land is transferred, reconstruction relief has been claimed and control of the purchasing company changes within the relevant time period. That anti-avoidance provision has been carried forward into SDLT in the schedule. The Bill extends the clawback of relief to reconstruction relief to prevent avoiders from using that relief instead, which seems eminently

sensible, as they would certainly use that relief, unless we took this action.

Amendments Nos. 276 and 277 would limit the effectiveness of the anti-avoidance legislation by introducing the concept of persons acting together. They would prevent reconstruction or acquisition relief from being withdrawn unless the persons to whom control had passed had acted together, and would therefore create a loophole in the legislation. Persons intent on avoiding the clawback charge would ensure that they did not fall within the definition of acting together when gaining control of the purchasing company. The clawback would therefore not be triggered, and the purpose of the Bill would be frustrated.

Paragraph 9 is an important part of our anti-avoidance strategy for SDLT and shows that we are serious about combating avoidance. I assure the hon. Gentleman that if control of a publicly owned company changes as a result of an ordinary market transfer of its shares, there will be no recovery, because we do not intend to interpret change of control so widely that simple day-to-day transactions by unconnected minority shareholders on the stock exchange could trigger a clawback. I hope that, with that assurance, the hon. Gentleman will not press his well-intentioned but unhelpful amendments to a vote.

John Burnett (Liberal Democrat, Torridge and West Devon)

I am grateful for the Chief Secretary's comments. We all know of the famous case of Pepper v. Hart, which provides guidance. I hope that I shall not have to return to the matter on Report, but the fact that bona fide commercial transactions in the ordinary course of dealings on the stock exchange will not be taken into account by the stamp duty office of the Inland Revenue is an important concession. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 7, as amended, agreed to.

Clause 63 - Demutualisation of insurance company

Mark Prisk (Conservative, Hertford and Stortford)

This is a lengthy clause, but my point is narrow. I understand that the clause carries forward the provisions of section 96 of the Finance Act 1997. However, professionals and experts have raised a number of concerns, and I simply ask the Chief Secretary to confirm that the provisions in the Bill exactly match those in the 1997 Act in both form and substance.

John McWilliam (Labour, Blaydon)

Order. The hon. Gentleman has not done what I am about to say, but I want to make it clear to other hon. Members that it is not within the scope of the clause to discuss whether demutualisation is a good idea.

Rob Marris (Labour, Wolverhampton South West)

I shall be guided by you, Mr. McWilliam. I would like the Chief Secretary to explain why the relief in the clause, as well as that in clause 64, continues to exist.

I should tell the Committee that I am a joint policyholder of Standard Life, which is a mutual insurance company, and a joint mortgage holder of Nationwide Building Society, which is mutual building society.

I would not seek to question the strictures you placed on the debate, Mr. McWilliam, but I hope that the Chief Secretary will explain why the Government have seen fit to continue the relief that was introduced in section 96 of the Finance Act 1997. Clause 64 continues the relief for building societies that was introduced in 1986. That could, if anything, encourage demutualisation and members could and should be aware of the stamp duty land tax cost if they chose to demutualise.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I, too, recognise your guidance, Mr. McWilliam, but I want to put on the record my belief that the clause removes an impediment to carpetbaggers who want to initiate another vote on Standard Life. With the appalling record of demutualisation and the effect on policyholders* why is the clause in the Bill?

Paul Boateng (Labour, Brent South)

I am tempted, but must resist going down the route suggested by my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) and the hon. Members for East Carmarthen and Dinefwr and for Hertford and Stortford. I shall bear your strictures in mind, Mr. McWilliam.

I can reply in the affirmative to the hon. Member for Hertford and Stortford. The clause provides relief from stamp duty land tax when land is transferred from a mutual insurance company to a public company owned by the members of the mutual company after demutualisation. That is based on the relief from stamp duty in section 96 of the Finance Act 1997. Similar relief is provided for mutual building societies in clause 64. The clauses speak for themselves. It is right to ensure that such vehicles are treated in the same way as any other company reconstruction. Recognising—for reasons that you will understand, Mr. Chairman—that I was not able to respond as he would have liked to my hon. Friend the Member for Wolverhampton, South-West, I hope that the Committee will give the clause a fair wind.

John McWilliam (Labour, Blaydon)

May I reassure the Committee that my qualifications are in telephony, not telepathy.

Question put and agreed to.

Clause 63 ordered to stand part of the Bill.

Clause 64 - Demutualisation of building society

John McWilliam (Labour, Blaydon)

The shout of Aye on the previous clause was awfully quiet. Can I encourage the Committee to shout rather than to nod their heads? I know that one of our colleagues had a birthday party last night, but he is not in the room at the moment, so it would not be unkind to speak up.

Mark Prisk (Conservative, Hertford and Stortford)

I was not aware that some heads were sore. I shall attempt to be soothing in my remarks, but

not too soothing where the Chief Secretary is concerned.

The clause provides relief from stamp duty land tax for land transactions that are part of the demutualisation of a building society. I understand that the clause is based on section 102 of the Building Societies Act 1986, and extends the exemption to cover the new land tax. Looking with care at the explanatory notes, I see that they state that section 102 would continue to provide relief from stamp duty for the transfers of shares and securities to a company. They also state that section 97 of the Building Societies Act 1997 provides for the demutualisation of a building society by the transfer of its business to a commercial company. While that is helpful, can the Chief Secretary confirm that, so far as he is aware, nothing here would unduly assist a carpetbagger to attack the mutual character of a building society? Conservatives value the role and the work of building societies and we would welcome a clear statement on the matter from the Chief Secretary.

Paul Boateng (Labour, Brent South)

The clause provides relief from stamp duty land tax on transfers of land from a mutual building society to a public company on demutualisation of the building society. It is based on the existing stamp duty relief in section 102 of the Building Societies Act 1986. A similar relief for mutual insurance companies is provided by clause 63, as we have discussed. The rationale behind the continuation of the reliefs is that, before and after any change, the members will be largely the same so it is, in effect, a reconstruction. It is right that it should be treated broadly as a vehicle in the same way as a company reconstruction; that will be accepted by members of all parties. It does nothing to assist carpetbagging; there is no change to the impact of existing legislation, so the mutuals are no more vulnerable than they were before. It simply replicates a relief on the basis that vehicles of this nature and companies in the course of a reconstruction should receive broadly the same treatment. On that basis, and with that assurance, I am sure that the Committee will support the clause.

Question put and agreed to.

Clause 64 ordered to stand part of the Bill.

Clause 65 - Incorporation of limited liability partnership

Mark Prisk (Conservative, Hertford and Stortford)

The clause deals with the incorporation of limited liability partnerships. Many Committee members will know that that equivalent of a corporate structure has been increasingly popular for many of the leading professions—in law, accountancy, surveying and so on. Therefore, the clause will be of particular concern and interest to those limited liability partnerships.

I have one specific question. The explanatory notes assure us that the clause merely re-enacts the existing relief under the Limited Liability Partnerships Act 2000, although ''with minor amendments''. Will the Chief Secretary advise us as to what those amendments are and how they may affect a

partnership? Clearly, that is relevant. A number of professionals have asked me whether this provision is what they describe as a belt-and-braces approach, particularly clause 65(4)(b). Will the Chief Secretary touch on why he believes that that subsection is essential to the clause?

Paul Boateng (Labour, Brent South)

Clause 65 provides an exemption from SDLT if a partnership incorporates a former limited liability partnership. It mirrors an existing stamp duty relief, subject to certain conditions. When land is transferred to an LLP in connection with its incorporation, the land transaction will be exempt from duty. The clause ensures that the stamp duty relief for the incorporation of LLPs continues in SDLT.

There is a technical defect in the current legislation if the partnership is incorporated into an LLP. The transfer is exempt if the partners in the LLP are the same as they were when the LLP was incorporated and when the transfer takes place. Often, the LLP is incorporated with two nominees, so the exemption never applies. If the nominees are merely acting as nominees or bare trustees for the partners, the exemption will still apply.

I am asked why the amendments are minor. They merely bring what we are discussing into line with the SDLT, rather than stamp duty. They do not change in any way the provision's effect. On the question whether the anti-avoidance provision in clause 65(4)(b) is necessary, it carries forward the anti-avoidance rule in the current stamp duty legislation. It is a standard provision that prevents the relief from being granted if there is a change in the proportionate holding in the partnership as a result of a scheme or arrangement of which the main purpose, or one of the main purposes, is tax avoidance. Removing that provision would encourage SDLT avoidance, which would not be consistent with the Government's commitment to fairness.

With that clarification of the minor amendments and the technical defect in current legislation and the explanation of why the anti-avoidance provision in clause 65(4)(b) is necessary, I hope that the Committee will accept clause 65.

John Burnett (Liberal Democrat, Torridge and West Devon)

I took the Limited Liability Partnerships Bill through Parliament for my party. With regard to flexibility, it would help if the Chief Secretary would confirm, as I hope he can, that if there is disincorporation, if I may use that expression, of a limited liability partnership, or distribution of LLP property in specie back to a partnership—in other words, the limited liability partners want to cease to be limited liability partners and become ordinary partners—or if an LLP wants to incorporate and become a limited company, similar stamp duty reliefs will apply.

Paul Boateng (Labour, Brent South)

I want to reflect on that point. Having taken that Bill through the House for his party, the hon. Gentleman will recall that there was some discussion at the time. The position is that there is no relief at present for disincorporation. Stamp duty follows the rest of the tax system in that regard, and I

am not aware of any intention to depart from existing practice.

John Burnett (Liberal Democrat, Torridge and West Devon)

I hope that the Chief Secretary will at least consider that point. As the Chancellor emphasised yesterday, it is important for us to have a flexible economy, and part of that flexibility is to enable the business—what is the word I am looking for?

Rob Marris (Labour, Wolverhampton South West)

Fluidity?

John Burnett (Liberal Democrat, Torridge and West Devon)

No, no—structure. I want the business structure to be changed if it is in the interests of the shareholders. People should be able to move quickly, tax-efficiently and without punitive tax treatment from limited companies, limited liability partnerships or partnerships or to becoming sole traders again.

Paul Boateng (Labour, Brent South)

The hon. Gentleman makes an interesting point, and I shall reflect on it.

Question put and agreed to.

Clause 65 ordered to stand part of the Bill.

Clause 66 - Transfers involving public bodies

Paul Boateng (Labour, Brent South)

I beg to move amendment No. 286, in

clause 66, page 45, line 3, leave out 'statute' and insert 'a statutory provision'.

John McWilliam (Labour, Blaydon)

With this it will be convenient to discuss the following:

Government amendments Nos. 253 to 256.

Paul Boateng (Labour, Brent South)

The clause enacts a relief that applies when interests in land are transferred from one body to another in connection with a statutory reorganisation of functions. In those circumstances, any tax otherwise paid would have to come from public funds. The clause also includes a power for the Treasury by order to exempt other statutory transfers when either the purchaser or vendor is a public body. The amendments concern what in broad terms is meant by ''statutory'' for the purposes of the clause. The clause currently makes various references to ''statute'', ''provision of statute'' or ''enactment'', and amendments Nos. 253, 255, 256 and 286 replace them with the single term ''statutory provision''. Amendment No. 254 deletes a definition of ''statute'', which is not needed when the other amendments are made. The term ''statutory provision'' is defined in clause 121 and is used generally in stamp duty land tax legislation.

These minor amendments are designed to improve the consistency and clarity of the Bill, and I commend them to the Committee on that basis.

Mark Prisk (Conservative, Hertford and Stortford)

Given the explanatory notes that have been provided with the amendments and the Chief Secretary's comments, we welcome this attempt to clarify the Bill. We are more than happy to accede to the amendment.

Amendment agreed to.

Amendments made: No. 253, in

clause 66, page 45, line 7, leave out 'provision of statute' and insert 'statutory provision'.

No. 254, in

clause 66, page 45, line 17, leave out subsection (4).

No. 255, in

clause 66, page 46, line 22, leave out 'an enactment' and insert 'a statutory provision'.

No. 256, in

clause 66, page 46, line 23, leave out 'any enactment' and insert 'a statutory provision'.—[Mr. Boateng.]

Question proposed, That the clause, as amended, stand part of the Bill.

Mark Prisk (Conservative, Hertford and Stortford)

The clause deals with the transfers involving public bodies. It is a conventional clause that occurs in many Bills, and will exempt obvious public bodies. It is tempting not to consider what is included, but what is not included. Other Committee members may have other examples, but I want to raise the question of Network Rail. It is a private company that does not distribute profits by dividends to shareholders, so is it exempt? Furthermore, will the Chief Secretary tell us whether it is exempt when it is engaged in joint projects with the Strategic Rail Authority for the Department for Transport?

George Osborne (Conservative, Tatton)

My hon. Friend puts an excellent argument about Network Rail. He will of course know that the Comptroller and Auditor General has strongly recommended that the Treasury account for the liabilities that it carries for Network Rail. In effect, Network Rail is being backed up and guaranteed by the Government, and is a Government body in all but name.

Mark Prisk (Conservative, Hertford and Stortford)

That is exactly the ambiguity of the Government's position. I look forward to the Chief Secretary clearing that particular ambiguity up. It seems to be beyond the ability of the Secretary of State for Transport, or his predecessor.

On the wider issue, there is the question of how the scope and the tax implications of the clause affect PFI and PPP schemes. My concern is that those schemes are not expressly exempted. There are attempts elsewhere, which we have touched on previously, to try to define where and how PFI and PPP should be dealt with—in paragraph 10 of schedule 4, for example. There have also been other problems in clause 48. Subsection (1) states:

''A land transaction entered into on, or in consequence of, or in connection with, a reorganisation effected by or under statute is exempt from charge if the purchaser and vendor are both public bodies.''

The concern is for those parties and potential partners that the Government wish to engage from the private sector into such schemes to improve and reform public services. There is clearly a danger that the clause will not recognise those relationships.

Will the Chief Secretary explain whether it is the Government's intent to ensure that PFI and PPP schemes are exempt, and ensure that all those partners, public and private, that are engaged in those processes are exempt? If that is so, would he explain why it is not expressly stated in the clause?

Paul Boateng (Labour, Brent South)

Existing legislation includes various individual exemptions from stamp duty if interests and land are transferred from one public body to another in connection with a reorganisation of statutory functions. In such circumstances, any duty otherwise paid would have to come from public funds. Treasury Ministers are regularly asked to approve similar exemptions for inclusion in new legislation.

Clause 66 properly replaces that individual approach with a general exemption from stamp duty land tax for transfers between public bodies in connection with statutory reorganisation. That includes transfers under devolved Scottish and Northern Ireland legislation, and the clause lists the types of public bodies to which it applies. The clause also includes a power for the Treasury by order to exempt other statutory transfers if either the purchaser or the vendor meets the definition of a public body.

The clause will automatically exempt from stamp duty land tax many transfers where existing stamp duty exemptions remain in use and many transfers resulting from new legislation without having to make individual provision in primary legislation. As such, it seems entirely sensible and worthy, and I am rather disappointed by the mischievous attempts by Opposition Members to hang various other rather tendentious points on it. I am tempted to respond to them, but I think that I must resist for fear of falling outwith the subject matter of the clause.

The hon. Member for Hertford and Stortford should not press the matter because I do not think that Conservative Members, given the extent to which they have been complicit in the botched privatisation of the railway network—

Kali Mountford (Labour, Colne Valley)

We had to clear up their mess.

Paul Boateng (Labour, Brent South)

My hon. Friend refers to us having to clear up their mess and she is absolutely right. Network Rail is our response to the mess that we inherited from the stewardship, if I can call it that, of the rail network by Conservative Members. Network Rail—I have been pushed to this, Mr. McWilliam—is not a public body. It is a private company limited by guarantee with membership drawn from a wide variety of those connected with and using the rail industry. For a change, those people have the interests of the rail industry at heart, unlike the representatives of the party of the last Administration, who ran down the railway system and botched its privatisation. We take no lessons from—

John McWilliam (Labour, Blaydon)

Order. The ''dog that did not bark in the night'' argument is perfectly in order. However, we are going very wide of that.

Michael Jack (Conservative, Fylde)

Will the Chief Secretary give way?

Paul Boateng (Labour, Brent South)

I must resist the temptation to give way.

I return to the specific question that I was asked about why there was no general exemption for PFI projects. Participants in PFI projects are private sector companies, but we are continuing to consult on the detailed application of the Bill to those projects. I will

ensure that the points made by hon. Members are taken into account during that consultation.

Michael Jack (Conservative, Fylde)

I am disappointed that the Chief Secretary did not give way. I shall ask my question in the hope that it will hang in the record, or he will do me the courtesy of giving an answer. He mentioned that there was a definition of a public body. I was simply going to ask where I could find that definition. I ask the question in the light of the terminology that he used about statutory reorganisation.

I would like to put an example to him. Currently, the Horticultural Research Institute—which is a non-departmental public body whose status and position in law has been the subject of question and debate for some considerable time—is negotiating with Warwick university to become a department of that university. That is a sensible proposal, and the Department for Environment, Food and Rural Affairs has indicated that it is content for those discussions to go ahead. Bearing in mind the fact that there are considerable land and property interests in such a move—and that the reorganisation came as a result of a publicly required quinquennial review of the HRI—what happens if the HRI comes to an agreement with Warwick university that it should become a department of that university? In that context, is the university counted as a public body? Is the HRI counted as a public body, and if so, what happens?

Paul Boateng (Labour, Brent South)

It will not surprise hon. Members that I am not going to go down that road. I will not get into the business of defining public bodies.

Mark Prisk (Conservative, Hertford and Stortford)

No road map?

Paul Boateng (Labour, Brent South)

Indeed, no. I do not intend to do what the right hon. Member for Fylde would never have dreamt of doing when he sat on these Benches, and that is to get into statutory definition on the hoof. That would be most unwise, and I do not intend to go down that route. However, I refer him to the time-honoured approach to these issues, which is not to provide a definition in statute, but to provide a list.

Michael Jack (Conservative, Fylde)

Will the Chief Secretary give way?

Paul Boateng (Labour, Brent South)

Not at the moment. There is a list, and that is what has been done over the years. The right hon. Gentleman urges that one body or another be put on that list. I hear what he says.

Michael Jack (Conservative, Fylde)

Will the Chief Secretary give way?

Paul Boateng (Labour, Brent South)

No. Such matters can very often be best dealt with by regulation, and any organisation that is concerned about its status and the impact of the provisions on any transaction would do well to contact officials. They will receive such advice as is appropriate. That is the course that I would commend to the right hon. Gentleman. I can do no more than that.

Michael Jack (Conservative, Fylde)

It is amazing that the Chief Secretary to the Treasury has failed to answer a simple question. I asked where I could find the definition of a public body. He says that he is not going to go down that route. Now he tells us that there is a list of public bodies. If he had stood up and said that the list can be found at X, Y or Z, I would have been happy. I would not have expected the Chief Secretary to the Treasury

to indulge in making definitions. I ask merely for a simple answer to a simple question.

Paul Boateng (Labour, Brent South)

I do not want to interrupt the right hon. Gentleman unfairly, but he asked me for a definition. I decline to give him a definition. I referred him to the list, which is to be found in clause 66(5). That is traditionally how such things are done. I decline to give a definition just as he would have done. I hope that the list will satisfy him, but I doubt it.

Michael Jack (Conservative, Fylde)

I thank the Chief Secretary, but it took two attempts before he would give me the answer.

Question put and agreed to.

Clause 66, as amended, ordered to stand part of the Bill.

Clause 67 - Transfer in consequence of reorganisation of parliamentary constituencies

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I beg to move amendment No. 285, in

clause 67, page 47, line 21, after 'constituencies', insert—

'(ab) ''parliamentary constituency'' includes Assembly constituencies as defined in Schedule 1(1) of the Government of Wales Act 1998 (c.38) and Scottish Parliament constituencies as defined in Schedule 1(1) of the Scotland Act 1998 (c.46).'.

The clause will exempt transfers of land between local constituency organisations of political parties if the transfers occur merely as a result of boundary changes. It is based on existing stamp duty relief provisions in the Finance (No. 2) Act 1983. Some might legitimately interpret that as politicians looking after their own at a time of dwindling public trust in the political process, which would be unfortunate. However, there is a justifiable rationale for the provisions. After all, boundary changes are beyond the control of political parties—at least, one hopes so—and they would have no financial gain from such a transfer. It would simply be a shifting of ownership from one unit of the party in question to another. The exemption is analogous to that offered under schedule 7 to subsidiary companies of the same group.

The amendment seeks to clarify whether the proposed relief will be available to constituency parties organised on Scottish parliamentary or Welsh Assembly boundaries. Currently, seats in Westminster and in the devolved Administrations are coterminous in Wales and Scotland, but as the Chancellor is doubtless keenly aware—although he may view the changes with a good deal more equanimity than some—the boundary commission proposed changes in February 2002. Perhaps the hon. Member for Glasgow, Maryhill (Ann McKechin) can confirm that.

The number of Scottish MPs at Westminster will be cut from 72 to 59. It had been anticipated in some quarters that that might lead to an equivalent cut in the number of Members of the Scottish Parliament, but the Secretary of State for Scotland decided to maintain the existing number. Boundaries for Westminster and Holyrood constituencies will no longer be coterminous. Many parties in Scotland will choose to organise themselves principally on Scottish

parliamentary constituencies. I think of my hon. Friends in the Scottish National party, the Scottish Socialist party, the Scottish Green party and other parties that exist exclusively in Scotland.

George Osborne (Conservative, Tatton)

How about the Conservatives?

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I was referring to the SNP. I do not have many hon. Friends in the House, and I want to hang on to them. I have many friends, but not many hon. Friends.

It would seem wrong and against the spirit of the provision to discriminate against political parties that wish to structure themselves along devolved Administration boundaries. Part of the problem is that the clause is based on a similar provision in section 15 of the Finance (No. 2) Act 1983—from the pre-devolutionary era. Section 15(1) refers to Orders in Council made under section 3 of the House of Commons (Redistribution of Seats) Act 1949. If it had referred instead to Orders in Council made under section 4 of the Parliamentary Constituencies Act 1986, the problem would not have arisen, because that Act has been extended by the Scotland Act 1998 and the Government of Wales Act 1998 to include boundary changes for the devolved Administrations.

As I am relatively uninitiated in parliamentary procedure, imagine my surprise when I found, on looking at Butterworths' database—I was aided in doing so by the Committee Clerk—that the 1986 Act repealed the Redistribution of Seats Act 1949, as the Chief Secretary to the Treasury confirmed in a letter to me. I am no expert in procedural matters but I believe it is impossible to make an Order in Council under an Act that has been repealed. As drafted, the clause is null and void, although I understand that the Government intend to table an amendment on Report. Will the Chief Secretary confirm that if such an amendment refers to the 1986 Act, it will automatically include the devolved Administrations in Wales, Scotland and Northern Ireland for exemption purposes?

Paul Boateng (Labour, Brent South)

I thank the hon. Gentleman for his care and attention to the provision. I commend his diligence and I am grateful to him for bringing to light an inappropriate reference, which will need to be changed. We shall table an appropriate amendment on Report.

Clause 67, to which the amendment relates, exempts from SDLT transfers of land between parliamentary constituencies that are undertaken between constituency associations where those transfers are undertaken following parliamentary boundary changes. An amendment would include references to the devolved Administrations so that when the boundaries change and transfers take place they are similarly exempt. The clause reflects the current stamp duty provisions by granting relief from stamp duty land tax on the transfer of property between constituency associations when the transfers take place following boundary changes. In extending the relief to Scotland and Wales, I reassure the hon. Gentleman and the Committee that we intend the relief as drafted to apply throughout the United Kingdom. I am sympathetic to the amendment's

objectives and I shall consult the relevant public bodies to see whether anything else is needed to ensure that the proposal applies in the devolved Administrations, as it does in the national Parliament. [Interruption.]

John McWilliam (Labour, Blaydon)

Order. Someone has switched on an electronic device. The Chief Secretary does not need a musical accompaniment.

George Osborne (Conservative, Tatton)

The point made by the hon. Member for East Carmarthen and Dinefwr was that the clause refers to an Order in Council made under an Act of Parliament that does not exist. Rather than asking the Committee to agree to a clause that is completely meaningless in law, the Government should withdraw the provision and table a clause on Report that is better drafted and incorporates the points made by the hon. Gentleman.

John McWilliam (Labour, Blaydon)

Order. We have not reached the clause stand part debate, and because of the way that the Committee is proceeding, we are unlikely to do so.

Paul Boateng (Labour, Brent South)

I am sure that the hon. Gentleman is trying to be helpful. I would prefer to proceed as I indicated to the hon. Member for East Carmarthen and Dinefwr, whose diligence and care drew the matter to the Committee's attention, rather than as suggested by the hon. Gentleman, who attempted to jump on the bandwagon in a rather unbecoming way. He should apply himself with the same diligence as the hon. Member for East Carmarthen and Dinefwr.

George Osborne (Conservative, Tatton)

While he is talking about diligence, could the Chief Secretary confirm that he has brought before the House a clause that refers to an Order in Council under an Act that has been repealed?

Paul Boateng (Labour, Brent South)

I have responded directly and clearly to the hon. Member for East Carmarthen and Dinefwr, who made that good point. The reference was inappropriate and we shall revisit it on Report. I know that the hon. Member for Tatton (Mr. Osborne) has to justify his existence, but there must surely be a way of doing it other than by jumping on the excellent point that the hon. Member for East Carmarthen and Dinefwr made, which I have wholeheartedly accepted and for which I have thanked him.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

Given the assurance that the Chief Secretary has offered, I am prepared to withdraw the amendment. I am also impressed to see a touch of humility in his formidable repertoire of skills, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn

Michael Jack (Conservative, Fylde)

On a point of order, Mr. McWilliam. You remarked a moment or two ago that we had not yet reached clause stand part. Could you guide me on whether it would be in order for the Government not to move that the clause stand part of the Bill at this stage?

John McWilliam (Labour, Blaydon)

No, it would not. If the Government moved an amendment to the clause on Report, that would be exactly the same as tabling an amended clause on Report. The clause is necessary in other respects. I put the question on the clause, and I was about to do that when the hon. Gentleman stood up.

John Burnett (Liberal Democrat, Torridge and West Devon)

Further to that point of order, Mr. McWilliam. It strikes me that the entire clause is, as everyone admits, based on an Act that does not exist. In any contractual law and under any interpretation the clause is surely void ab initio.

Paul Boateng (Labour, Brent South)

More Latin!

John McWilliam (Labour, Blaydon)

Order. I can cope with the Latin—I went to grammar school as well.

The point is exactly as I have said. The Committee will dispose of the clause, having regard to undertakings already given.

Clause 67 ordered to stand part of the Bill.

Clause 68 ordered to stand part of the Bill.

Schedule 8 - Stamp duty land tax: charities relief

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 204, in

schedule 8, page 179, line 40, leave out 'conditions are' and insert 'condition is'.

John McWilliam (Labour, Blaydon)

With this it will be convenient to discuss the following:

Amendment No. 7, in

schedule 8, page 179, line 41, leave out from beginning to end of line 4 on page 180.

Amendment No. 205, in

schedule 8, page 180, line 5, leave out 'second'.

Mark Prisk (Conservative, Hertford and Stortford)

The effect of the amendments taken together would be to remove paragraph 1(2) and to amend paragraph 1(3). Schedule 8 puts into effect the new relief provisions for charities for the new tax. The issue with which the amendment deals has drawn the widest range of representations of all those that I have received, in particular from the Charities Tax Reform Group, which represents more than 500 charities. The amendments would remove paragraph 1(2), as it is the condition detailed therein that is new and which we believe restrains tax relief on charities and creates potentially burdensome bureaucracy for them.

Paragraph 1(1) states:

''A land transaction is exempt from charge if the purchaser is a charity and the following conditions are met.''

It goes on to list a series of conditions. On the face of it, the conditions may appear reasonable, but several tax experts, legal firms and charities have highlighted the fact that implementing the measure would require all charities, large and small, to provide separate returns for each property that they own or lease, showing that they qualify under paragraph 1(2). For some properties, that will involve an annual task, but it could be much more frequent, perhaps even quarterly, for many properties. That will represent a significant bureaucratic and regulatory burden for many national and local charities, especially if they hold properties that they have yet to bring into use.

I shall give a hypothetical example. A local hospice charity has recently become the owner of a mixed-use building in a town centre. It has been left to the charity and is largely empty. It may have been an unexpected gift; nevertheless, it is welcome. Most charities, like most organisations, would take much of the next year

to consider what to do with it. It would be difficult for the charity to convert it quickly, but it would need to do that to fulfil the condition that it is used for charitable purposes or that it creates profits that go toward charitable purposes. Would the charity be liable for tax in such circumstances? The schedule suggests that it would.

The charity would also have to provide a separate return for the property. Presumably, it would have to fill in another return when the circumstances changed, as it would if it chose to lease the property. Why should hospices or other charities, whether large or small, be liable for stamp duty under the new system when they are not now? Does not the Chief Secretary accept that the legislation is actually a serious step backwards for charities? Would he also accept that the partial regulatory impact assessment is, regrettably, what was once termed economical with the actualité? It states:

''The cost of compliance is unlikely to increase significantly for mainstream charities that are proposing to use the land acquired for charitable purposes only.''

It will not increase for charities that fall within the definition in the clause, but there will be a significant burden of cost on those that do not. Why are they not mentioned?

The schedule takes the tax anti-avoidance purpose much too far. It introduces a mean-spirited condition that will create greater compliance costs for the majority of charities and unfair tax bills for many others. Will the Chief Secretary assure us about the scope of the tax avoidance that he is tackling? How much is it worth to the Treasury? How many examples can he provide? Is such avoidance truly of a scale that it merits such a clumsy and unfair restraint on charities? I hope that he is able to respond positively, because the matter is of great concern to many people outside this place.

Paul Boateng (Labour, Brent South)

The schedule and the clause enact a general relief for charities from the scope of the tax. They reflect the existing relief but modify it in some ways. At present, charities are entitled to a relief from stamp duty simply by virtue of being registered as a charity or otherwise incorporated for charitable purposes only. That is a reasonable enough arrangement if the charity entering into the transaction is a bona fide one—a household name. The Government have no intention of increasing the burden on such charities under the modernised regime.

However, a small number of people—small, but not without significance—have been abusing the system by purchasing property using little-known, poorly regulated charities as a front for purchases of land, which will be used for non-charitable purposes. Unfortunately, such charities have become the vehicles of choice for some tax avoidance. I shall give one recent example. It appears that the real purchaser of a piece of land put a little known charity in funds for the purchase price of some land. The charity then acquired the relevant land in its own name and applied for charities relief. The land was transferred to the real purchaser for a nominal

amount, attracting nominal duty. The real purchaser agreed to re-convey the land for a nominal value if the charity so requested within, say, four weeks, but we assume that that obligation was merely to forestall arguments that the transaction was not in the relevant charity's interests, and that the request never came. Other examples include the charity acting as a nominee for the true purchaser, avoidance by way of subsale, and the charity being a tenant under a new lease of the relevant land, involving a large premium and a peppercorn rent.

Such schemes amount to calculated avoidance of stamp duty. There is evidence that they are cheap and easy to set up, so they could become a lot more common if nothing is done to prevent them. The modernised regime will make some of the schemes more difficult, but new ones arise all the time. Under the current system, the Inland Revenue has no ability to look beyond the charity's registration or incorporation status to consider what it will use the property for and whether the property will be held for the benefit of another. A charity need only provide evidence of its registration or status for the relief to be automatic.

Paragraph 1 enacts two additional conditions that must be met before relief is available. I do not think that the hon. Gentleman will, on reflection, find them unreasonable. First, the purchaser must intend to hold the subject matter of the transaction for charitable purposes. That includes cases in which a charity buys a property as an investment, but the profits are applied for charitable purposes. Secondly, the transaction must not have been entered into with the intention of avoiding tax. If the two conditions are not met, the charity cannot obtain the relief. For the vast majority of charities, the conditions will be met in every case and relief will be available simply by ticking a box. That is not an onerous obligation to place on a bona fide charity.

The conditions are backed up by a clawback if the purchaser ceases to be established for charitable purposes only, or if the land is used for purposes other than charitable purposes. The clawback period is three years. That will not affect the overwhelming majority of charities with operations that are completely above board. The clawback does not prevent a charity from selling the land within three years.

Clearly, the relief for charities is an important benefit that fits in with the general tax reliefs available to them. Although conditions to the relief are being imposed for the first time, they are very light. Legitimate charities will always be able to meet the conditions and will never be affected by the clawback. However, the new powers will allow the Inland Revenue to eliminate the small minority of taxpayers who currently use charities as an avoidance route. Using that form of avoidance is particularly mean and nasty. Nevertheless, sadly it is used, and for that reason clause 68 and the schedule are necessary.

Charities are required to submit a return, but they simply have to tick a box to claim the relief. The Government are acutely aware of the importance of the charities sector. The Chancellor has taken time to

bring before Parliament a whole raft of measures to promote charitable giving and reduce the burdens on charities. The provisions do not amount to extra regulations if charities intend to use the properties for genuine charitable purposes, which they will in the vast majority of cases. Different jurisdictions have different regulatory regimes. The regimes are not always adequate when it comes to preventing abuse. We must take cognisance of that. That is not unreasonable.

The Revenue needs the ability to look into suspected schemes in more detail. Investigations are extremely unlikely to be required in the case of mainstream charities and the vast majority of smaller charities that regulate their business and go about the process properly so as to promote the charitable purposes for which they are set up.

I understand why the amendments were tabled, but I do not believe that they are helpful, for the reasons that I have given, nor that the costs of compliance will be unduly burdensome. Only charities that create and use an avoidance vehicle will face the consequences of this measure. My experience of the charitable sector is that it welcomes measures designed to prevent the abuse of that status and has an interest in ensuring that charities and charity registration are a hallmark of probity and excellence. It would expect the Revenue to bear down heavily on avoidance schemes that bring the sector into disrepute. In my experience, it is highly supportive of that activity.

John Burnett (Liberal Democrat, Torridge and West Devon)

I think that we all agree with what the Chief Secretary said about using charities for the purpose of artificial tax avoidance. There seems to be some uncertainty and confusion about clause 1(3), the general tax avoidance point. It would help if the Chief Secretary made it clear to the Committee that, when the Bill refers to avoiding tax, he does not mean the tax relief due to charities pursuant to the law.

Paul Boateng (Labour, Brent South)

I most certainly do not mean that.

Mark Prisk (Conservative, Hertford and Stortford)

I was interested in what the Chief Secretary said. I noted particularly that he felt that the existing arrangements were perfectly reasonable, which raises the question, ''Why change them?'' Unless I missed it, I did not hear a response about the specific case of the hospice charity and whether the example that I gave would be eligible for relief, but perhaps he will come back on that point.

The Chief Secretary knows as well as we do that it is wrong for people to try to evade their due tax liability, and we would always be happy to support the Government where they do so. However, as he said, a very small number of parties are involved, and our worry is that the provision will be a sledgehammer to crack a nut that will weigh down the majority of mainstream charities.

The Chief Secretary said that the change means simply ticking a box, which sounds reasonable, but I suspect that the Revenue would not be too thrilled to receive a lot of 12-page land transaction returns with nothing on them but a box ticked on page 8. Clearly the matter is more involved than that. Every return

will have to have the name of the charity, the property and the nature of the interest, so that the Revenue can register it. It will then certainly require, as the Chief Secretary said, a tick in a box to demonstrate that a charity is involved, but all the other details that go with the 12-page tax return, which is part of the process, will still have to be there. Therefore, the description of ''merely'' ticking a box is not quite accurate. I fully accept that some of the appendices to the return may not be required, but the basic information for each and every interest will still have to be included.

In the extensive information, enforcement and compliance powers that commence from clause 93, the Revenue is giving itself—I do not criticise it in general terms—significant, established and wide-ranging powers to investigate returns that it believes to be unfair or undue. Would it not be fairer for the majority of law-abiding charities if it used those powers rather than the schedule, which we believe will create a genuine burden? The very fact that charities will now all be required to fill in the forms raises the question of whether the Government trust them. The Government are rightly giving themselves significant information, enforcement and compliance powers elsewhere. Those powers will enable them to pursue the instances to which the Chief Secretary referred. We think that the examples that he gave will be able to be chased elsewhere, and on that basis, we believe that it is wrong to persist with the schedule.

Paul Boateng (Labour, Brent South)

I hear the hon. Gentleman, but I am afraid that I do not accept what he says. So far as burdens are concerned, the details required on the return are already in legal documentation and supplied by all purchasers including charities on form LA451. It is not a burden to require anyone to tick a box.

There is a mischief here, which the schedule is designed to address. I have already given the hon. Member for Torridge and West Devon, albeit from a sedentary position, the assurance that we are here talking about avoidance, not simply the claiming of a relief. I fear that the measure is necessary.

John Burnett (Liberal Democrat, Torridge and West Devon)

I am grateful to the Chief Secretary for giving way on that point, which is an important one on which people are confused. In other words, as he knows, there are many tax reliefs for charities, and this legislation enacts reliefs for stamp duty for charities, and the charity's claiming reliefs to which it is entitled under statute, is definitely not deemed to be avoidance, for the purposes of this anti-avoidance provision.

Paul Boateng (Labour, Brent South)

It is important to recognise that the definition of qualifying charitable purposes is wide. It meets the needs of charities, such as hospices, of the sort that the hon. Member for Hertford and Stortford spoke about. However, it is necessary to take steps to ensure that we bear down on this sort of avoidance. It is sad that we have come to this pass, but there is in a particular jurisdiction a concerted attempt to use charities in a way that, quite frankly, calls into question the bona fides of the sector as a whole as well as providing a vehicle for avoidance, and we have to do something about that.

Michael Jack (Conservative, Fylde)

In deciding on this schedule and its content to deal with the problem that the Chief Secretary has outlined, were discussions held with the charity commissioners on whether charitable status would be compromised by the use or promotion of such a vehicle that has the avoidance of tax as a principal purpose?

Paul Boateng (Labour, Brent South)

Certainly. In the examples that I have outlined, there is certainly an abuse of charitable status, and I would expect that to have consequences for the trustees and for the charity itself. I am glad to say that the charity commissioners in England are particularly vigilant with that device and have a regulatory framework that makes such abuse much harder. In other jurisdictions, it is easier, and there has been abuse.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 16.

Standing Committee B

(Except Clauses 1, 4, 5, 9, 14, 22, 42, 56, 57, 124, 130 to 135, 138, 139, 148 and 184 and Schedules 5, 6, 19 and 25, and any new Clauses and Schedules tabled by Friday 9th May 2003 relating to excise duty on spirits or R&D tax credits for oil exploration.) - Schedule 8 - Stamp duty land tax: charities relief

Paul Boateng (Labour, Brent South)

I beg to move amendment No. 287, in

schedule 8, page 180, line 8, leave out 'of persons or a' and insert 'or'.

The purpose of the amendment is to clarify the types of bodies that can benefit from charities relief. The amendment changes ''body of persons'' to ''body''. It is intended to make it clear that every charitable body can qualify for the relief, even if it is, under the law, a corporation sole. An example of a corporation sole is a vicar or a rector of the Church of England. We want it to be beyond doubt that every corporation sole, if it is established for charitable purposes, is entitled to the relief. There may be some doubt about that at present, although as the hon. Member for Torridge and West Devon (Mr. Burnett) is not in his place, I fear that the doubt will not be explored extensively—perhaps he will join us before the end of the debate. There may be some doubt because, by definition, a corporation sole will always consist of a single individual rather than persons, in the everyday sense of the word. A corporation sole would clearly be a body. I commend the amendment to the Committee.

Mark Prisk (Conservative, Hertford and Stortford)

I must say, it was a delightful performance from the Chief Secretary, niftily touching on bodies and souls. It was a treat. The amendment has much to commend it. The performance was not quite as enticing as the one that was given on Friday evening when yet again the Chief Secretary's body was on display to one and all on ''Have I Got News for You''. I do not want to upset people's stomachs at this stage in the day. I am more than happy to say that we do not oppose the amendment.

Amendment agreed to.

Schedule 8, as amended, agreed to.

Clause 69 - Acquisition by bodies established for national purposes

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I beg to move amendment No. 119, in

clause 69, page 47, line 40, at end add—

'(f) The National Museums and Galleries of Wales.'.

John McWilliam (Labour, Blaydon)

With this it will be convenient to discuss amendment No. 206, in

clause 69, page 47, line 40, at end add—

'(f) Trustees of the National Museums of Scotland;

(g) Scottish Natural Heritage;

(h) National Galleries of Scotland;

(i) Historic Scotland.'.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

In tabling these probing amendments, I was seeking to understand the rationale underlying the list of organisations that qualify for stamp duty land tax relief. The title of the clause refers to bodies ''established for national purposes''. As a Welsh nationalist, I am mindful of the fact that there are three nations in the UK, in addition to the Province of Northern Ireland, each of which has its own distinctive purposes. The list of bodies has a somewhat London-centric feel. The Historic Buildings and Monuments Commission for England, which is known as English Heritage, is a specifically English body that has exact equivalents in Scotland and Wales, which are not mentioned.

As I understand it, the list has its origins in section 507 of the Income and Corporation Taxes Act 1988, which allows the five bodies to claim back income tax as if they were charities. The relief for the British Museum and the Natural History museum is long-standing and goes back to the early 19th century.

George Howarth (Labour, Knowsley North and Sefton East)

I know that the hon. Gentleman would not do this deliberately, but I do not want him to mislead the Committee. English Heritage is not a London-centric body and its representatives in the north-west met me in my constituency office last Friday to talk about its work in the north-west region.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I stand admonished by the hon. Gentleman. I was specifically referring to the British Museum and the National History museum, both of which are London-centric in a narrow geographic sense. English Heritage obviously covers the whole of England, and its equivalent bodies—Historic Scotland, Cadw: Welsh Historic Monuments—perform the same function of conserving and preserving historic monuments and castles in Wales and Scotland. I am glad that he clarified that point.

The National Heritage Memorial Fund and the Historic Buildings and Monuments Commission for England were respectively established in 1980 and 1983, when specific provision was made for their tax relief. The National Endowment for Science, Technology and the Arts was established under the National Lottery etc. Act 1993, and again provision was made for it to enjoy tax relief.

The probing amendments list equivalent organisations in Wales and Scotland, although one

could have extended the list to include bodies in Northern Ireland—for example, the board of trustees of the Ulster museum. National Museums and Galleries of Wales is a registered charity and Scottish Natural Heritage is a recognised charity, and they would both be covered by the clause. The position of National Galleries of Scotland, National Museums of Scotland and similar organisations such as the National Library of Wales and the National Library of Scotland, which have talked about satellite sites in the past and could be involved in land transactions, is unclear, and I have been unable to ascertain their charitable status.

The potential unfairness is clearest in the tax treatment of bodies equivalent to the Historic Buildings and Monuments Commission for England, such as Historic Scotland and Cadw: Welsh Historic Monuments. Unlike in England, those bodies are Executive agencies of the devolved Administrations and as such would be exempt from stamp duty involving transfers from other public bodies under clause 66. By definition, many of the acquisitions made by those two organisations would be from private individuals, in which case the English body—the Historic Buildings and Monuments Commission for England—would enjoy a tax advantage not offered to the equivalent organisations in Wales and Scotland charged with the conservation of heritage.

About 20 castles, including Leeds castle, Shrewsbury castle and Bolton castle, are in private ownership. If the Historic Buildings and Monuments Commission for England were to acquire those castles, it would enjoy tax relief under clause 67. However, Braemar castle and Inverkip castle, Ayrshire—

George Osborne (Conservative, Tatton)

The Castle of Mey.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

The Castle of Mey is an interesting case. Since 1996 it has been owned by a charitable foundation, which would count as a private person in the law. The tax exemption would not apply to Historic Scotland acquiring the Castle of May. Carreg Cennen castle in my constituency was famously sold in the 1930s by the Earl of Cawdor to cover a gambling debt. He forgot that the castle, which is currently privately owned, was within the plot of land that he was selling. If Cadw: Welsh Historic Monuments wanted to acquire it—this would apply to Cardiff castle, Caldicott castle, Gwynedd castle and any other privately owned castles in Wales—tax duty relief would not apply. I cannot imagine that the Government would want to appear to be putting a greater intrinsic value on the historic heritage of England than that of Scotland or Wales.

I stress that these are probing amendments, but I would be grateful if the Chief Secretary would confirm that the same tax relief will apply for acquisitions from private individuals by organisations in Wales and Scotland that are the equivalent of the Historic Buildings and Monuments Commission for England.

Paul Boateng (Labour, Brent South)

Under section 507 of the Income and Corporation Taxes Act 1988, a shortlist of five well-known bodies is entitled to the same reliefs from tax as

charities. Clause 69 makes those bodies exempt from stamp duty land tax. Generally, they were established for purposes that are in the national interest, but they cannot as a matter of law be recognised as charities because they are only semi-independent of central Government. I stress that that is why they are dealt with in a specific way for income tax and why clause 69 does the same thing for stamp duty.

The bodies are not on the list because they are in any way especially worthy or more important than bodies that have been omitted. Many more bodies could be added to the list, as is reflected in the amendments, but the five bodies need a specific rule because as a matter of law they are separate corporate bodies that are not able to attain charitable status. Most other contenders for the list, including some of those proposed in the amendments, do not need to go on the list because they are charities or have charities associated with them.

For example, the hon. Member for Tatton (Mr. Osborne) mentioned the castle of May. I thought that his comment would be the precursor to his sharing with us the names of palatial homes in the vales of Tatton. We heard so much in an earlier sitting about the arrangements for the acquisition of one such home that I had hoped we might hear more.

George Osborne (Conservative, Tatton)

I take particular interest in the subject, as one of only two Members of Parliament whose constituency is named after a historic building—the hon. Member for Brighton, Pavilion (Mr. Lepper) being the other.

Paul Boateng (Labour, Brent South)

That is very interesting—yet another reason to go to Tatton. When the Committee adjourns, having served the public so selflessly on the Finance Bill, it really ought to pay a visit to Tatton to see not only the hon. Gentleman's palatial residence but the historic building.

George Howarth (Labour, Knowsley North and Sefton East)

I recommend that my right hon. Friend visit Tatton—it is a delightful place—but the hon. Member for Tatton might care to reflect on the fact that the name Knowsley derives from the home of the earls of Derby, which is in my constituency.

Paul Boateng (Labour, Brent South)

Tatton via Knowsley, or Knowsley via Tatton—I cannot think of a happier prospect. Either way, the journey will be extremely pleasant.

George Howarth (Labour, Knowsley North and Sefton East)

Of course, my right hon. Friend would be more than welcome in Knowsley. He would be warmly received there.

Paul Boateng (Labour, Brent South)

I am quite sure that I would.

George Howarth (Labour, Knowsley North and Sefton East)

The capital of culture.

Paul Boateng (Labour, Brent South)

The capital of culture indeed.

George Osborne (Conservative, Tatton)

The right hon. Gentleman is a cultural icon.

Paul Boateng (Labour, Brent South)

Don't go there.

The activities of the five bodies listed in the clause are as much of public benefit as the activities of bodies that are able to attain charitable status; hence, a special rule in the 1988 Act. The clause puts stamp duty land tax on an equal footing with the other taxes for those bodies, and I commend it to the Committee.

The amendments are well-meaning—and the bodies to which they refer are very worthy—but I hope that the hon. Member for East Carmarthen and Dinefwr (Adam Price) will be satisfied by my explanation as to why they are not necessary. As I explained, the list in clause 69 is based on the list in section 507 of the 1988 Act.

The National Museums and Galleries of Wales is a working name adopted by the body incorporated as the National Museum for Wales. As the hon. Gentleman is no doubt aware, that body operates a number of museums in Wales, not just the national museum and gallery in Cardiff. The National Museum for Wales is a corporate body, established by royal charter in 1907, with a renewed charter adopted from the 1907 charter in 1991. The amendment would be effective only if it referred to the National Museum of Wales, rather than the National Museums and Galleries of Wales, since that latter is a working name rather than a legal one.

I can confirm, however—I am sure that this will satisfy the hon. Gentleman—that the museum is treated as being established for charitable purposes by the Revenue, so it falls within the current stamp duty exemption. That is confirmed by the museum's most recent annual report for 2001–02 in section 1.11, and has also been confirmed to me by the Inland Revenue. The museum is also regulated by the charity commissioners as charity No. 525774.

Assuming that the activities of the museum do not radically change in the near future, and I cannot believe that they would, there is no reason why the museum should not fall within the relief in clause 68 following the enactment of the stamp duty land tax. I hope that that sets the hon. Gentleman's mind at rest. Amendment No. 119 would be superfluous.

The Inland Revenue has also advised me that, in practice, Scottish Natural Heritage is already treated as being established for charitable purposes, and it therefore falls within the current stamp duty exemption. Once again, there is no reason to suppose that that will not continue under the modernised regime. Historic Scotland is an agency of the Scottish Executive and should therefore be covered by the relief in clause 107(2), to which the hon. Member for East Carmarthen and Dinefwr referred.

The other two bodies listed in the amendment are not charities, but have charities associated with them. Amendment No. 206 is therefore also superfluous, and I hope that, having had an interesting debate prompted by the amendment, the hon. Gentleman will feel able to withdraw it.

John McWilliam (Labour, Blaydon)

I have no interest in any of those bodies now, but I used to be the trustee of the Toure collection housed in the national gallery of Scotland, so I used to have an interest.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

With the confirmation that the Chief Secretary has generously provided, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 69 ordered to stand part of the Bill.

Clause 70 ordered to stand part of the Bill.

Schedule 9 - Stamp duty land tax: right to buy, shared ownership leases etc

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I beg to move amendment No. 281, in

schedule 9, page 181, line 21, at end insert—

'(j) the National Assembly for Wales.'.

John McWilliam (Labour, Blaydon)

With this it will be convenient to discuss amendment No. 280, in

clause 71, page 48, line 30, at end insert—

'(j) the National Assembly for Wales.'.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

This amendment would add the National Assembly for Wales to the list of bodies in clause 71. The other amendment would do the same thing in schedule 9. The list of public bodies includes central Government, local government, Scottish Ministries and the Executive agencies. Scottish Homes is included in schedule 9, as are the Northern Ireland Departments and the Northern Ireland Housing Executive. The only level of Government to be omitted is the National Assembly for Wales. The reasons for that are unclear.

It is true that the Executive of the National Assembly for Wales are not currently a public sector landlord. The National Assembly as a legislature is not a public sector landlord either, so the provisions do not seem directly relevant. However, housing policy is a wholly devolved matter and while it is not currently policy in Wales for the Welsh Assembly to be involved in the direct provision of housing, the policy may change. There may be a change of hue in the Government of the National Assembly for Wales at some point in the not-too-distant future. The National Assembly for Wales could, therefore, under the terms of the devolution settlement, choose to become a public sector landlord by setting up an equivalent organisation to Scottish Homes, as it was, or the Northern Ireland Housing Executive to provide affordable housing in designated areas. Indeed, such are the financial difficulties that many local authorities in Wales face in maintaining their housing stock that Gareth Hughes, the former chief executive of Tai Cymru, Housing for Wales, the former executive agency with responsibility for housing, has suggested transferring the housing stock to Assembly ownership via a national housing corporation. If the National Assembly for Wales is not included in the clause, then stock transfer, or right-to-buy schemes in the case of Assembly-owned housing, would be at a tax disadvantage. The Development Board for Rural Wales was a public sector landlord prior to its incorporation in the Welsh Development Agency, so there are precedents.

I respectfully ask the Government, in the spirit of devolution, to include in the clause their esteemed colleagues in the National Assembly. I should point out that Scottish Homes, which is mentioned in clause 129, no longer exists. It was wound up in 2001 and has been superseded by a new body, Communities Scotland. That reference will therefore need to be changed on Report. I am developing a bit of a reputation for this kind of thing.

Paul Boateng (Labour, Brent South)

I am grateful to the hon. Gentleman for pointing out that that organisation is now defunct and that we need to amend the reference for Report. That will certainly be done.

Clause 71 provides an exemption from stamp duty land tax for a range of transactions where the purchaser is a registered social landlord. Amendments Nos. 280 and 281 would add the National Assembly for Wales to the list of prescribed qualifying bodies that may be the vendor in a transaction and the list of relevant public sector bodies that may arrange right-to-buy transactions under paragraph 1.

Paragraph 1 reflects the current stamp duty provisions by granting relief from stamp duty land tax for the transfer of property to a registered social landlord. It sets out a list of qualifying bodies that may be the vendor in such transactions, including various social housing providers such as other registered social landlords and local councils. The amendment would add the National Assembly of Wales to that list of qualifying bodies. However, we have consulted the Assembly's housing directorate, which has informed us that the amendment is not necessary, and I am not minded to go behind its judgment. In the spirit of devolution, it would not be appropriate for me to do so. I am unlikely, I fear, to succumb to the hon. Gentleman's temptations, particularly—I hesitate to draw this to his attention, but feel bound to do so—as one must reflect on the Welsh electorate's verdict at the last Assembly elections.

Amendment No. 281 relates to the same principle. I understand where the hon. Gentleman is coming from, but I cannot accept his argument. We are asked to add the National Assembly of Wales to the list of various social housing providers, such as registered social landlords and local councils. However, the National Assembly does not own any properties that could be disposed of under the right to buy, nor has it drawn to our attention any intention on its part to become a social landlord. An amendment of this nature would therefore be unnecessary. While thanking the hon. Gentleman for this interesting, though mercifully short, debate, I urge the Committee to reject the amendments.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I am very disappointed that the spirit of generosity from the Chief Secretary that prevailed this morning has not extended beyond lunch. The key point is that the principle underlying the devolution settlement is very much an enabling one. I fully accept that the Welsh Assembly Government—the Executive arm of the National Assembly for Wales—are neither a public sector landlord currently nor have the explicit objective in their housing strategy to become one. However, it is possible under the devolution settlement that a Government of a different political complexion could decide to have an alternative policy including the direct provision of public housing in certain designated areas through a national housing corporation. It would seem wrong for a Finance Bill in this place to bind the hands of the National Assembly for Wales over its housing policy. Under the Government of Wales Act 1998, it has been recognised that that should be a decision for the elected Members.

I stress that that is for elected Members, not officials of the department of the National Assembly for Wales that deals with housing. It is a matter for the elected Members of that legislature to decide at some future date, and it would seem entirely wrong simply to omit the National Assembly for Wales from the schedule, and, therefore, to decide through this Finance Bill what the housing policy of some future Administration of the National Assembly should be. I am quite used to being in a minority of one, and I will press the amendment to a vote unless the Chief Secretary is about to tell me that he will think again and perhaps consult his colleague the Minister for Local Government and Housing in the Welsh Assembly Government, rather than a lowly housing official.

Paul Boateng (Labour, Brent South)

There is a tradition in this Committee and this House that one does not deprecate dedicated public servants. To describe the official who was good enough to speak to my civil servants as a lowly housing official is a bit cheeky, if I may say so. The hon. Gentleman may wish to reflect on that and perhaps withdraw his comment.

I seek to set the hon. Gentleman's mind at rest. If it came to pass that the National Assembly went into the business of being a social landlord or leasing properties, it would always be open to the Ministers concerned and/or the Secretary of State to press their case, in which case we could use regulations to add to the list in paragraph 1 of schedule 9. There is no need for the amendment and, on reflection, the hon. Gentleman might not want to press it to a vote. He has all that he needs. If that situation came to pass, it would be open to the Government through the exercise of the regulatory power, to add the National Assembly to the list in paragraph 1 of schedule 9. For that reason, the amendment is simply unnecessary, but it is a matter for him to decide.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I am suitably admonished by the Chief Secretary. Certainly, nothing that I said was intended to deprecate the important function of the civil service in Wales. I was seeking to deprecate the Chief Secretary's proposal to omit the National Assembly for Wales. Why strive to retain the omission when the import in terms of revenue to the Treasury would be fairly minimal, given that we are talking about a hypothetical situation at this stage? The principle is very important. Under the enabling spirit enshrined in the Government of Wales Act 1998, the National Assembly for Wales should decide what its approach to housing policy should be. As I am a member of the Welsh National party, I am afraid that I shall have to press the amendment to a vote.

Question put, That the amendment be made:—

The Committee divided: Ayes 2, Noes 15.

David Wilshire (Conservative, Spelthorne)

On a point of order, Mr. McWilliam, I understood that there was an error in the schedule because the Chief Secretary admitted that a defunct organisation was included. Is it sensible to allow a schedule to stand part of the Bill when it contains an error? Would it not be better for the Chief Secretary to admit his mistake, withdraw the schedule and return with it properly drafted? I am not comfortable about approving something that the Government admit contains an error.

John McWilliam (Labour, Blaydon)

We dealt with that matter on clause stand part this morning.

Schedule 9 agreed to.

Clause 71 ordered to stand part of the Bill.

Clause 72 - Alternative property finance: land sold to financial institution and leased to individual

Mark Prisk (Conservative, Hertford and Stortford)

We welcome the overdue recognition in the Budget and the Bill of the distinct position of those of the Islamic faith who need mortgages, and we are happy to support the Government in their aim. Having abolished subsale relief earlier, they are now having to target relief. Will the Chief Secretary confirm that the arrangements are applicable to the non-residential market as well, because they are particularly important for small businesses?

Paul Boateng (Labour, Brent South)

Stamp duty land tax allows for fairer tax treatment of property purchases by individuals financed by certain types of alternative mortgage products. Purchasing a property with an Islamic mortgage currently results in a higher stamp duty charge than when using a conventional mortgage. The modernised regime removes that anomaly, putting the stamp duty treatment of purchases financed in that way on a level footing with purchases financed by conventional mortgage products. The benefits are not restricted to the Islamic community, because the Government believe that many other consumers may benefit from increased choice in the mortgage market. The reliefs do not exclude all commercial transactions. Transactions made by individuals or a group of individuals, including partnerships when all the partners are individuals, can make use of the reliefs, and whether the property being purchased is residential or commercial is not a factor in the availability of those reliefs.

Question put and agreed to.

Clause 72 ordered to stand part of the Bill.

Clauses 73 and 74 ordered to stand part of the Bill.

Clause 75 - Crofting community right to buy

Ann McKechin (Labour, Glasgow Maryhill)

I should like to raise a matter that I have already raised with my right hon. Friend. The exemption under the Land Reform (Scotland) Act 2003 is very welcome. The Scottish Parliament has carried out a widespread programme of land law reform in Scotland and, as a property lawyer in Scotland, 2001 was a good year for me to change career because I would have required comprehensive re-education in many areas of law.

The exemption covers crofting communities who exercise their right under the Land Reform (Scotland) Act 2003 to purchase their land from the owner in certain circumstances. Given the value of the land concerned, that is an important exemption because the value is likely to be in the highest band. Why has the exemption not been extended to include purchases under part 2 of the Land Reform (Scotland) Act 2003, which confers a similar right on bodies representing rural communities to buy land with which the community has a connection? The right is different in that an interest must be registered, and the right to buy is exercised when the land is marketed or sold by the proprietor. That is likely to involve people with little finance who must raise it from the public sector or charity and funds are difficult to obtain. The additional burden of stamp duty, usually at the highest rate of 4 per cent., on top of the purchase price, could act as a barrier to communities that want to exercise their right to buy land in those circumstances.

There seems little reason why a distinction should be made between crofting and rural communities when it is clear that the intention of the legal reform is to allow communities the right to purchase property and to develop it as they see fit. They are the people who occupy the land and use it, and I hope that on Report my right hon. Friend will consider extending the valuable exemption to transactions covered under part 2 of the Land Reform (Scotland) Act 2003.

Paul Boateng (Labour, Brent South)

I am grateful to my hon. Friend the Member for Glasgow, Maryhill (Ann McKechin) for her interest in this and other clauses with a Scottish dimension, and for the expertise and care with which she has addressed the issues. I have given careful consideration to what she said and to the representations made by the Law Society of Scotland.

The purpose of the clause is to remove an anomaly in the application of stamp duty land tax charges that could act as a barrier to the use of the crofting community's right to buy. It is a group right, and similar problems occur—as described when we discussed the previous clause—with the right to enfranchise, because there is only one transaction on behalf of a number of individuals. That means that the total consideration is likely to be high and may attract a stamp duty charge at the higher rates. That in turn means that people can be put off exercising their right.

The clause seeks to address the problem by determining the rate at which to charge stamp duty land tax on a lower calculated value than the actual consideration. In many cases, that will reduce the amount of stamp duty due and bring it more in line with the stamp duty that would have been due had each share in the transaction been bought separately.

That should make the crofting community right to buy more attractive.

I was asked why we have not introduced relief for the Scottish community right to buy. The matter was raised in advance of my hon. Friend's contribution in correspondence from the Law Society of Scotland. I should make it clear that the relief for the crofting community right to buy was introduced with the specific purpose of removing that barrier for crofters who wish to buy their crofts under the terms of that right. The type of purchases made under the community right to buy do not encounter the same problems, and similar relief to that provided in the Bill for the crofting community right to buy would not be appropriate.

I am aware that some—the Law Society of Scotland is among them—have an interest in extending the clause to the community right to buy, but such an extension would not be appropriate. It is important to recognise and to respect the distinction between the community right to buy and the crofting community right to buy. Under the crofting community right to buy, a crofter purchases their croft in conjunction with other crofters and buys a number of separate pieces of land in one large transaction. As I have indicated, in many cases the transaction will be charged at a higher rate, from which many disadvantages flow.

The community right to buy is different: community bodies can register an interest in a piece of land and when it is available for sale have the right to purchase it. The right is mostly used to purchase one piece of land rather than separate pieces of land, which is the particular characteristic of the crofting community right to buy, and the same problem does not therefore occur. The stamp duty land tax charge on community right-to-buy purchases is fair and appropriate. It will not be unduly burdensome because of the numbers of pieces of land acquired. The same relief should not therefore be available.

With that explanation, I hope that my hon. Friend will feel that the issue has been considered, that we have taken into account the particular circumstances in relation to both the community right to buy and the crofting community right to buy, and that we have reached a just and equitable result.

Question put and agreed to.

Clause 75 ordered to stand part of the Bill.

Clause 76 - Duty to deliver land transaction return

Mark Prisk (Conservative, Hertford and Stortford)

The clause begins the administration of the new land tax and is therefore an important matter on which we should spend a moment or two. It establishes the duty to deliver land transaction returns. It states:

''In the case of every notifiable transaction the purchaser must deliver a . . . land transaction return''.

The land transaction return, including the self-assessment of liability and the payment of stamp duty land tax, must be delivered to the Revenue

''before the end of the period of 30 days after the effective date of the transaction.''

Subsection (3)—the explanatory notes erroneously refer to subsection (1)—provides that the return must include a self-assessment of liability and

''be accompanied by payment of the amount chargeable.''

Many professional bodies and leading chartered accountants have asked why the payment cannot be made within the same time limit. Why must the payment accompany the return? Taxpayers may want agents to file their returns while paying their tax themselves or they may want to file their returns manually while paying their tax electronically. We have heard a great deal about e-business and e-conveyancing, but their importance has been ignored. The logic of the clause is that the tax will always be payable, but that is clearly incorrect because in some cases a return must be filed in order to claim a relief. Again, the Bill appears to contain a mistake.

There are other concerns. Many leading professionals feel that the 30-day period is too short to complete the form and to pay up, a combination to which I referred earlier. The earlier proposal put out to consultation offered a quarterly return and a payment cycle as an option for business. It was perfectly fair and matched modern commercial practice, but it seems to have vanished. When did the time limit change to 30 days and why did that happen? Does the Chief Secretary accept that professional bodies and leading practitioners, including the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation, KPMG and PricewaterhouseCoopers, have said that the deadline should be reconsidered for the majority of taxpayers? Conservative Members would appreciate it if the Chief Secretary recognised those points and acknowledged them in his remarks.

George Osborne (Conservative, Tatton)

I rise for the same reason as my hon. Friend. The clause is the first of a series of clauses that highlight the fiction that stamp duty land tax is connected with the old stamp duty. The compliance system under the old stamp duty was based on documents being sent to the Inland Revenue, where they were stamped. Payment was made once they had been checked and the stamp had been applied. Clause 76 and subsequent clauses contain a whole new method of collecting duty, which is the same collection method used for other taxation because it applies to the transaction rather than to the document. The explanatory notes ominously state that the clause allows stamp duty land tax to use established procedures familiar to many tax practitioners and to the Inland Revenue. It is worth bringing to the Committee's attention the fact that all connections with stamp duty, which exists in name alone because it has nothing to do with duties on stamps, are being severed.

John Baron (Conservative, Billericay)

I support the comments made by my hon. Friend the Member for

Hertford and Stortford (Mr. Prisk) on subsection (3)(b), which lacks flexibility. I should be interested in the Chief Secretary's view on why the Government insist that the return must be accompanied by payment of the amount chargeable. Why can the payment not be made within the same time limit? Small businesses in particular have told me that the requirement will affect them. They would appreciate as much flexibility as possible.

I particularly stress a point that has already been mentioned: a taxpayer may want an agent to file their return but want to pay their own tax, which is becoming increasingly common. I ask the Chief Secretary to address that point directly.

Paul Boateng (Labour, Brent South)

This is the first clause dealing with the new administrative scheme and enhanced compliance powers. The modernisation of compliance powers is the cornerstone of the modernisation of stamp duty—I stressed the word ''modernisation'' for the benefit of the hon. Member for Tatton. We are bringing up to date antiquated compliance powers that have lingered on well past their sell-by dates. I shall address his charge in more detail in a moment.

The current stamp duty laws do not contain a recognisable compliance system. I shall give some examples of the problem, which I thought that all hon. Members would recognise. There is currently no obligation to submit documents for stamping, and the Inland Revenue has no powers to force taxpayers to do so. The tax is therefore often referred to as being voluntarily, which was a point made in Committee last week. There is no power to assess under-stated duty. Once a document has been stamped, that is the end, no matter what new information comes to light. The hon. Member for Hertford and Stortford cannot seriously be suggesting that that is right. No person is explicitly liable to pay the tax, so if the Inland Revenue had the power to assess, it would have no one to chase for the tax.

Those weaknesses have been known since 1983, but the hon. Member for Tatton suggests that the legislation is the sinister sign of a novel new tax—in 1983, he was probably the chubby-cheeked terror of the first remove. Nevertheless, even in 1983 the then Conservative Government—no doubt he was a juvenile supporter of the Conservative party even at that early age; he has that precocious feel about him—recognised that something was wrong. The hon. Gentleman's predecessors who had responsibility for such matters asked Lord Keith of Kinkel, a well known and respected law lord who, sadly, is now deceased, to look into the matter to see how the enforcement powers of the Revenue in that respect could be improved. The report made a number of clear recommendations regarding stamp duty among which were obligations to bring documents to stamp, improve information powers, modernise appeal procedures and improve penalties. It took a new Labour Government in 2003—some 20 years later—to introduce all those things. There was an intervening period under Conservative Administrations in which absolutely nothing—zilch—was done.

Mark Prisk (Conservative, Hertford and Stortford)

This is a charming and doubtless fascinating walk down memory lane, but none of the

items that the Chief Secretary has mentioned relate to anything referred to by those on the Conservative Benches. Our concerns relate to why the payment has to accompany the return, the 30-day deadline and the other matters that my colleagues have raised. Why give us the history lesson? Just give us the facts.

Paul Boateng (Labour, Brent South)

I gave a history lesson because I was provoked into it by the hon. Member for Tatton, who insists that we are talking about a novel and sinister new Labour innovation. We are talking about no such thing.

George Osborne (Conservative, Tatton)

Will the Chief Secretary give way?

John McWilliam (Labour, Blaydon)

Order. Can we calm down a bit? We are going a bit wide. We are discussing the duty to deliver a land transaction return and only that.

George Osborne (Conservative, Tatton)

Thank you, Mr. McWilliam. I am happy to have an exchange on our views and opinions in 1983. My opinions were more consistent than the Chief Secretary's.

The clause reveals that the name of the tax is a fiction because it has nothing to do with duties or stamps. Why does the Chief Secretary not admit that fact, say that it is a wholly new tax with a wholly new collection mechanism and be done with it?

Paul Boateng (Labour, Brent South)

I make no such admission.

I regard myself as having been drawn back to the detail of the clause, Mr. McWilliam—[Hon. Members: ''Ah!''] No, I am only too happy to do so.

Let us consider some of the points that have been made. I was asked, ''Why 30 days? What happened to the idea of quarterly returns?'' Quarterly returns were first floated as an idea in the consultation document for large groups. In fact, the idea did not much interest those consulted, because they habitually used different legal advisers for each deal and did not see any great benefit in it, so we did not pursue it. That is what consultation is all about. We are accused of not listening. We did listen, and we did not pursue the idea as a result of what we were told. The 30-day limit runs from the completion of the purchase, and, in the great majority of cases, all the money has changed hands by then. There is no justification for a longer time limit. It would cause delay and be costly to the Exchequer.

I was asked, ''Why does the payment have to accompany the form?'' At present, payment is made to the Revenue with the documents for stamping. Requiring the payment to accompany the return continues that practice. Again, there is nothing novel about that. There is no great innovation. It is just common sense. We want to issue the certificate quickly, but if payment is not made with the return, we would have to delay issue until it is made.

For all those reasons, I have no hesitation in commending the clause to the Committee. I hope that it will be given a good wind, because it certainly needs it, not least because the SDLT return will now be made on a form that will be processed centrally. If the return is properly completed and payment is made, the certificate will be issued. Certificates will be rapidly returned to solicitors, thereby allowing title to be transferred in good time. At present, documents must be checked at the time of stamping—that will no

longer be necessary—and the Inland Revenue can make inquiries afterwards. [Interruption.] It is called modernisation, or speeding up the process. Opposition Members ought to welcome it.

In the future, the facility will exist to transfer land electronically. In those cases, it will be possible to shorten yet more the time within which the return is made. All that should be welcome, and I hope that Opposition Members will see the sense of it and not pursue unnecessary and futile objections.

Question put and agreed to.

Clause 76 ordered to stand part of the Bill.

Clauses 77 and 78 ordered to stand part of the Bill.

Schedule 10 - Stamp duty land tax: returns, enquiries, assessments and appeals

Schedule 11 - Stamp duty land tax: self-certificates

Clause 90 - Application to defer payment in case of contingent or uncertain consideration

Mark Prisk (Conservative, Hertford and Stortford)

I beg to move amendment No. 193, in

clause 90, page 58, line 26, leave out '18 months' and insert '6 months'.

I feel almost giddy after racing through all those clauses. It seemed that someone had pushed the fast button on the escalator and we suddenly began to hurtle along.

John McWilliam (Labour, Blaydon)

Only me.

Mark Prisk (Conservative, Hertford and Stortford)

And very pleasant it was to move forward so quickly.

Amendment No. 193 relates to clause 90, which provides that a purchaser may make an application for stamp duty land tax to be deferred. The application may be made if the whole or part of the consideration for a transaction is contingent or uncertain and if some or all of the consideration

''falls, or may fall, more than 18 months after the effective date of the transaction.''

The purpose of this probing amendment is to replace ''18 months'' with ''6 months''. It follows from legal representations that I hope the Chief Secretary will bear in mind. In particular, I am grateful to the Law Society for its advice and support. The Law Society and several leading practices argue that, given the fact that stamp duty land tax is due 30 days after the transaction, it is unreasonable that an application to defer payment of stamp duty land tax can be made only where part of the consideration falls or may fall more than 18 months after the effective date. The period of 18 months should, on the basis of fairness and modern commercial practice, be reduced to six months. I commend that proposal to the Chief Secretary and hope that we will have a positive reply.

Paul Boateng (Labour, Brent South)

The amendment would reduce the time limit in clause 90 from 18 months to six months. It would allow a purchaser to make an application for stamp duty land tax to be deferred under clause 90 if some or all of the consideration fell more than six months after the effective date of the transaction. It would alter the circumstances in which an application for deferred payment could made by reducing the time limit in subsection 1(b). If the amendment were accepted, it would mean that, if the other conditions were met, an application for deferred payment could be made when some or all of the consideration fell more than six months after the transaction.

The amendment is in line with several representations that have been made on the clause. Having considered their detail carefully, we have accepted that the existing 18-month time limit may be unduly restrictive. We are therefore content with the amendment. I commend it to the Committee.

Turning to clause 90 itself, it provides that in certain circumstances a purchaser may make an application for SDLT to be deferred.

John McWilliam (Labour, Blaydon)

Order. If the Minister wants to deal with clause stand part at the same time, I am perfectly content. I am saying that so that other hon. Members know what we are doing.

Paul Boateng (Labour, Brent South)

I am grateful, Mr. McWilliam.

Payment of consideration in that way is not uncommon in complex developments. The clause will help purchasers who meet the criteria to plan for their payments of tax in those circumstances. The clause includes a regulatory power, under which regulations will be made to set out the detailed requirements for an application, to provide an administrative framework. There will be an opportunity for consultation on the regulations before they are laid, so that the Government can ensure that the administrative provision works effectively and practically for those who wish to make an application. Clause 90 allows taxpayers to defer SDLT payments in certain prescribed circumstances. I commend the clause, with the amendment, to the Committee.

Mark Prisk (Conservative, Hertford and Stortford)

I am delighted that the Chief Secretary has considered the amendment, listened to outside concerns, and accepted it. I welcome that.

Amendment agreed to.

Clause 90, as amended, ordered to stand part of the Bill.

Clause 91 ordered to stand part of the Bill.

Schedule 12 agreed to.

Clause 92 ordered to stand part of the Bill.

Clause 93 - Information powers

Mark Prisk (Conservative, Hertford and Stortford)

At this point, there is much flurry of paper as one ensures that one does not miss key things.

I am sure that we shall consider schedule 13 later, although it is related to clause 93. I should like to raise one or two points relating specifically to the clause, although I may make the odd reference to schedule 13.

John McWilliam (Labour, Blaydon)

Order. The hon. Gentleman is aware that there are amendments to schedule 13.

Mark Prisk (Conservative, Hertford and Stortford)

Indeed, Mr. McWilliam.

The clause introduces schedule 13, which provides a wide range of information powers. The clause deals with information powers additional to the power to issue a notice for documents and for the purposes of an inquiry in paragraph 15 of schedule 10. As I understand it, looking back through tax law, this measure is based on sections 20 to 20D of the Taxes Management Act 1970. The powers in the Bill are more general and apply not only to persons under inquiry but to third parties. Will the Chief Secretary confirm that this schedule contains no alteration to the scope of the powers of tax officials and the board, compared with the similar powers in established legislation?

If there is an inquiry such as would require a notice under sections 20 to 20D of the Taxes Management Act 1970 for income, corporation or capital gains tax, it would be possible, by adopting these powers, also to seek information on any stamp duty land tax aspects. I understand that there is an efficiency gain if the same officers deal with important inquiries.

A number of organisations, including the Institute of Chartered Accountants in England and Wales, have suggested possible ways in which the schedule might be tightened and improved, and in particular paragraph 1(3). Although I am referring to the schedule, I shall restrict my remarks to the clause. Will the Chief Secretary confirm that the powers are established and stick to the existing law? Is he confident that taxpayers—notably small businesses that are leasing their first shop or perhaps a first-time home buyer—will understand the full scope of the Revenue's powers and their obligations?

Despite what the Chief Secretary may say, this is a significant shift from a stamp duty to a land tax. Putting aside all the names and the fun that we have had about what things should or should not be called, taxpayers face the prospect of having to operate in an entirely different regime. Will the Chief Secretary make it clear that the Government intend to ensure that those who are paying the new tax, as opposed to the old duty, will understand that? That is fairly crucial, because all the talk about information, compliance, administration and enforcement comes to nothing if the taxpayers involved do not understand the significance of the change from the duty to the new tax.

Paul Boateng (Labour, Brent South)

The clause and the schedule reproduce for stamp duty land tax Inland Revenue information powers contained in sections 20 to 20D of the Taxes Management Act 1970. Current stamp duty provides no similar information powers to the Inland Revenue. It can ask about documents before it stamps them and can call for evidence if a taxpayer requests an adjudication of the amount of the duty, but there is no sanction if the information is not provided, except to refuse to stamp the documents. That cannot be a satisfactory state of affairs. Should the taxpayer decide that he does not want the documents stamped after all, he can simply take them away, and the Inland Revenue is powerless.

We make no apology for the fact that stamp duty land tax, by contrast, provides modern inquiry powers based on other taxes, incorporating proper appeal rights. The schedule is part of those modern powers and does no more than apply existing legislation for other taxes to stamp duty land tax. The powers in sections 20 to 20D of the 1970 Act are aimed at serious cases of tax avoidance and evasion, and their use is strictly controlled by the Inland Revenue. The extension of the powers to stamp duty land tax will be similarly closely controlled.

The clause also provides for civil penalties if the notices issued under the schedule are not complied with. There are similar penalties in the 1970 Act, which will be familiar to many who have served on Committees considering previous Finance Bills.

In reproducing the existing powers, the schedule defines legal privilege in paragraphs 35 and 48, which reproduce existing definitions in section 20C(4)(a) and paragraph 5 of schedule 1AA to the Taxes Management Act 1970.

The schedule reproduces existing legislation and does not contain any new definition of legal

professional privilege. The Government are fully aware of the case of R v. Special Commissioner, on the application of Morgan Grenfell & Co. Ltd, which hon. Members will no doubt be aware of. That case addresses the special commissioner's powers and clarifies existing law by saying that legal professional privilege is a basic human right that can be overruled only by specific wording or necessary implication, neither of which was present in the TMA power being discussed.

Following the Morgan Grenfell case, the Inland Revenue accepted that legal professional privilege applies to all its information powers, and the judgment gives clarity. By mirroring the TMA powers in the schedule, that clarity is retained. If different words were used, the clarity that the courts have provided would be lost. That is clearly not something that any of us would wish.

Jonathan Djanogly (Conservative, Huntingdon)

As legal privilege is such a long-established, historic legal concept, surely there is no need to define it? To define it could work against the actual concept.

Paul Boateng (Labour, Brent South)

We are avoiding the creation of any ambiguity by reproducing the existing definition in section 20C(4A) and paragraph 5 of schedule 1AA of the Taxes Management Act 1970. Those are the definitions referred to in paragraphs 35 and 48 of schedule 13. The schedule reproduces existing legislation for stamp duty land tax and does not contain any new definitions. We should read the definitions subject to their Lordships' ruling on the meaning of those definitions in that case.

George Osborne (Conservative, Tatton)

I should like to pick up on the point made by my hon. Friend the Member for Huntingdon (Mr. Djanogly). The Law Society has made representations stating that because of the Morgan Grenfell case there is no necessity to define legal privilege. It is long established in common law. The definition provided in the Bill cannot as a matter of law restrict the general meaning of privilege. The Law Society feels that what the Chief Secretary is doing is totally unnecessary, and it may be counter productive.

Paul Boateng (Labour, Brent South)

With respect, we take a different view. We cannot be in error if we reproduce the wording that was subject to interpretation by their Lordships in the Morgan Grenfell case. We can only be in a position in which their Lordships interpretation continues to prevail. Were we to omit any definition at all, or insert a different definition, we would expose ourselves to error and ambiguity, which is not something that we intend to do. With that explanation, I hope that the Opposition will accept that their amendments to schedule 13 would lead to an unsatisfactory situation and a divergence between the clause and the TMA. It would put taxpayers in a difficult position if these powers and those in the TMA were applied to the same documents.

Through the Lord Chancellor's Department, the Government have initiated a consultation following the Office of Fair Trading's report on competition in the professions. Legal professional privilege is one

issue in the consultation. A document was issued for consultation in July 2002, and responses were invited up to the 14 May 2003. It would be premature to make any changes to the references to LPP before the responses can be considered and decisions taken on the consultation. If the Government decide that changes in the law are needed, they will be made in the future when they can be made to the Taxes Management Act 1970 and the equivalent stamp duty land tax provision.

In response to the perfectly reasonable point made by the hon. Member for Hertford and Stortford about the importance of taxpayers understanding their obligations, we are undertaking an extensive customer education programme, aimed particularly at intermediaries, such as solicitors, conveyancers, other advisors and those active in the industry. I believe that that will go a long way towards meeting his concerns. I can confirm that there are no alterations to the scope of section 20 of the 1970 Act. With those assurances, I hope that the hon. Gentleman will withdraw the amendment.

John McWilliam (Labour, Blaydon)

Order. The amendments have not even been called yet.

The rest of the debate is in Hansard.