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Finance Bill: Labour backs GAAR despite reservations

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MPs debated a number of Finance Bill measures, including the general anti-abuse rule (GAAR), on 17 and 18 April in a committee of the whole house. The remainder of the Bill will be considered in detail by a public bill committee, beginning on 23 and 25 April.

17 April

The committee passed clauses 200 to 202 (bank levy) and clauses 203-212 and Schedule 41 (general anti-abuse rule) without amendment.

The following amendments tabled by Labour were defeated:

·         A new clause requiring the chancellor to review the possibility of bringing forward a mansion tax on properties worth over £2m and publish a report on how the revenue could be used to fund a tax cut for people on low and middle incomes (defeated by 304 votes to 234).

·         An amendment to clause 200 requiring the chancellor to review the possibility of incorporating a bank payroll tax within the bank levy and publish a report on how additional revenue raised would be invested to create jobs and tackle unemployment (294 votes to 234).

·         An amendment to clause 203 requiring the chancellor to review the possibility of requiring UK companies to report use of tax schemes having an impact on developing countries, and requiring HMRC to notify developing countries’ tax authorities and assist in the recovery of that tax (275 votes to 223).

·         A further amendment to clause 203 requiring the chancellor to report to parliament within two years of the passing of FA 2013, as part of a wider post-implementation review, into the scope of the GAAR, the application of the double reasonableness test and the rule’s deterrent effect (276 votes to 223).

Catherine McKinnell, the shadow exchequer secretary, expressed ‘deep concern’ at the delay in publication of HMRC’s final guidance on the GAAR. Almost 200 pages of guidance were published last Monday.

‘The guidance was initially expected to be published alongside the Finance Bill on 28 March but was published only on [15 April] – two hours before second reading and just two days before [MPs considered] the GAAR-related clauses,’ she said.

‘Sufficient time has not been provided for members to consider the guidance and any amendments required to the primary legislation as a result.’

McKinnell argued that the GAAR was ‘so narrow in tackling only the most egregious schemes that it could hardly be considered general at all’.

She added: ‘I’m keen to emphasise that we are willing to support the government in introducing the GAAR, but … we are not convinced that this version is up to the job.’

David Gauke, the exchequer secretary, accepted McKinnell’s point regarding the delay in the publication of HMRC’s guidance. However, it was ‘important than the [advisory] panel had the opportunity to get this right’, he said.

Gauke congratulated the panel for its work: ‘[The guidance] has received an excellent response and will provide much help to taxpayers wanting to know where they stand.’

A new clause tabled by the Labour MP Michael Meacher, introducing a general anti-tax-avoidance principle as set out in his recent private member’s bill, was withdrawn.

18 April

The committee passed clauses 1 and 3 (income tax charge and basic rate limit for 2013/14), clause 16 and Schedule 3 (limit on income tax reliefs), and clauses 183 and 184 (air passenger duty) without amendment.

A number of amendments tabled by Labour were defeated, including:

·         An amendment to clause 1 requiring the chancellor to report, within three months of the passing of FA 2013, on the additional rate of income tax; the impact of setting the additional rate at 50% in 2014/15: and the impact of reducing the additional rate for 2013/14 on the income tax paid by those with taxable incomes of over (a) £150,000 and (b) £1m (defeated by 264 votes to 203).

·         A new clause reducing the standard rate of VAT to 17.5% until the UK economy returns to open ‘stronger growth’ (244 votes to 193).

·         An amendment to clause 3 requiring the chancellor to report on the impact of tax changes on the living standards of basic rate taxpayers (248 votes to 192).