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PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES Public Bill Committee CORPORATION TAX (NORTHERN IRELAND) BILL Second Sitting Thursday 5 February 2015 (Morning) CONTENTS CLAUSE 1 under consideration when the Committee adjourned till this day at Two o’clock. PUBLISHED BY AUTHORITY OF THE HOUSE OF COMMONS LONDON – THE STATIONERY OFFICE LIMITED £5·00 PBC (Bill 149) 2014 - 2015 Members who wish to have copies of the Official Report of Proceedings in General Committees sent to them are requested to give notice to that effect at the Vote Office. No proofs can be supplied. Corrigenda slips may be published with Bound Volume editions. Corrigenda that Members suggest should be clearly marked in a copy of the report—not telephoned—and must be received in the Editor’s Room, House of Commons, not later than Monday 9 February 2015 STRICT ADHERENCE TO THIS ARRANGEMENT WILL GREATLY FACILITATE THE PROMPT PUBLICATION OF THE BOUND VOLUMES OF PROCEEDINGS IN GENERAL COMMITTEES © Parliamentary Copyright House of Commons 2015 This publication may be reproduced under the terms of the Open Parliament licence, which is published at www.parliament.uk/site-information/copyright/. 29 Public Bill Committee5 FEBRUARY 2015 Corporation Tax (Northern 30 Ireland) Bill The Committee consisted of the following Members: Chairs: SIR DAVID AMESS,†SANDRA OSBORNE † Barwell, Gavin (Lord Commissioner of Her † Mahmood, Shabana (Birmingham, Ladywood) Majesty’s Treasury) (Lab) † Dakin, Nic (Scunthorpe) (Lab) † Menzies, Mark (Fylde) (Con) † Durkan, Mark (Foyle) (SDLP) † Mills, Nigel (Amber Valley) (Con) † Evans, Chris (Islwyn) (Lab/Co-op) Pound, Stephen (Ealing North) (Lab) † Gauke, Mr David (Financial Secretary to the † Rutley, David (Macclesfield) (Con) Treasury) † Swales, Ian (Redcar) (LD) Johnson, Gareth (Dartford) (Con) † Wilson, Sammy (East Antrim) (DUP) † Jones, Andrew (Harrogate and Knaresborough) (Con) Marek Kubala, Committee Clerk Lopresti, Jack (Filton and Bradley Stoke) (Con) † McDonald, Andy (Middlesbrough) (Lab) † attended the Committee 31 Public Bill CommitteeHOUSE OF COMMONS Corporation Tax (Northern 32 Ireland) Bill I am working on the assumption that we will have a Public Bill Committee separate clause stand-part debate, so my remarks do not need to cover the whole Bill. The amendment is an Thursday 5 February 2015 attempt to sort out an omission in the Bill that involves treatment of small or medium-sized companies and (Morning) large companies, and what happens if the former do not quite meet all the conditions for such a company under [SANDRA OSBORNE in the Chair] the Bill. A small or medium-sized company could end Corporation Tax (Northern Ireland) Bill up being in a worse position than if it was a large company. 11.30 am The Government have tried to be sensible. We obviously The Chair: We now begin line-by-line consideration need to be careful that only companies operating in of the Bill. If Members wish, they may remove their Northern Ireland get a benefit from the lower corporation jackets in Committee, but if anyone does I will be very tax rate, which is why the large company rules set out surprised at this temperature. Please ensure that all your that a large company has to divide its activity between electronic devices are switched off or in silent mode. what is taking place on the mainland and what is taking place in Northern Ireland, so the lower tax rate is only The selection list for today’s sittings is available in the for the Northern Ireland share of its profits. That has to room. It shows how the selected amendments have been be the right approach. grouped together for debate. Amendments grouped together are generally on the same or a similar issue. A Member It is entirely fair to give a more simple regime to small who has put his or her name to the leading amendment and medium-sized companies in the UK, so that they in a group is called first. Other Members are then free to do not have go through the whole compliance horror of catch my eye to speak on all or any of the amendments trying to split their activities if they know that they are in the group. A Member may speak more than once in a really trading only in Northern Ireland or trading only single debate. a small amount. For a small or medium-sized company, the rules should give a lighter compliance burden, which I will work on the assumption that the Minister is to be welcomed greatly. wishes the Committee to reach a decision on all Government In some situations, however, a company might drop amendments. Please note that decisions on amendments out of the rules without realising and end up in a worse take place not in the order in which they are debated, position. The rules for small and medium-sized companies but in the order in which they appear in the amendment set out that they must meet the European Union size paper. In other words, debate occurs according to the criteria—some of which, helpfully, are in euros, which grouping in the selection list and decisions are taken can cause a bit of volatility in whether they are met. For when we come to the clause that the amendment affects. clarity, the rules state that a small or medium-sized I hope that explanation is helpful. company must have fewer than 250 employees and I will use my discretion to decide whether to allow a either turnover of less than ¤50 million or balance sheet separate stand-part debate on individual clauses and assets of less than ¤43 million. schedules following the debates on the relevant amendments. At the start of the Parliament, the ¤50 million turnover level would have been equivalent to about £45 million; Clause 1 at today’s exchange rate, that is about £38 million. A TRADING PROFITS TAXABLE AT THE NORTHERN company could have been small or medium sized at the IRELAND RATE start of the Parliament, but now that the euro has weakened in recent weeks, it might have fallen out of Nigel Mills (Amber Valley) (Con): I beg to move the criteria without expecting it. A company might amendment 1, in clause 1, page 9, line 26, at end think it is covered by the simplified rules but suddenly insert— might not be because of exchange rate movements, so it ‘(3A) If an election by an SME under this subsection has effect might not realise that that is how the rules are applied. the large company condition shall be treated as satisfied in relation to an accounting period and the SME condition shall be Another situation might arise whereby a small or treated as not satisfied in relation to the same accounting period. medium-sized company won a contract on the mainland (3B) An election under subsection (3A) can only be made by a late in the year. The hon. Member for East Antrim used company that in an accounting period— the example of a construction company in the evidence (a) is an SME for the purposes of section 357KC; session the other day. The company might undertake (b) is not a Northern Ireland employer for the purposes of the project as a useful way of splitting its income—it section 357KD; and might provide employment for people in Northern Ireland (c) has a NIRE. who are sent over to the mainland to do the work, (3C) An election for the purposes of subsection (3A)— which is all sensible. However, if the value of those (a) must be made by notice to an officer of Revenue and mainland contracts was more than 25% of its activity, Customs; the company would miss the 75% test in the Northern (b) must specify the accounting period in relation to which Ireland work force conditions, and its whole profit for it is to have effect; and that year would attract the higher mainland rate, not (c) must be made before the end of the period of 12 the lower Northern Ireland rate. The company might months beginning with the end of the specified not know that until right at the end of year, when it was accounting period.” trying to work out which of its contracts had been It is a pleasure to serve under your chairmanship this completed and which had been paid for. morning, Mrs Osborne, at the start of the Bill Committee That could lead to a real compliance burden. It could debates. It is a slightly unusual Bill, since we have six lead to a company not wanting to take on work that clauses and the first covers most of the Bill. might take it over the threshold, because the amount it 33 Public Bill Committee5 FEBRUARY 2015 Corporation Tax (Northern 34 Ireland) Bill earned could be less than the extra corporation tax it investment into Northern Ireland, we probably want ended up having to pay. This looks like an unfortunate small and medium-sized businesses on the mainland to situation, and it would leave a small or medium-sized say, “Actually, I do want to open another site. I want to business with, say, 70% of its activity in Northern open some more shops in my chain. I want to extend my Ireland having to pay the mainland UK rate of 20%, business somewhere else. Northern Ireland is quite an whereas a large company in the same situation would attractive place. I would like to work there. I would like get the lower Northern Ireland rate for the 70% of its to employ people there. I will put my next outlet in profit it made in Northern Ireland. That does not strike Northern Ireland.” However, such businesses cannot me as entirely fair or as what we probably intend.