STAMP DUTY LAND TAX AND STAMP DUTY

HC Deb 28 April 2004 vol 420 cc914-36

Mr. Mark Prisk (Hertford and Stortford) (Con)

I beg to move amendment No. 11, in schedule 37, page 506, line 30, leave out 'or request'.

As this is my first contribution today, may I also welcome you to the chair, Mr. McWilliam? You have chaired us during a number of our deliberations and I look forward to your guidance in the coming hours. I also welcome the Financial Secretary. She and I have discussed these issues on a number of occasions and I look forward to jousting with her later today, and indeed on this amendment.

Schedule 37 seeks, it is fair to say, to revise and to correct parts 4 and 5 of the Finance Act 2003. However, it also seeks to re-enact temporary regulations that were introduced under section 109 of the Act. Amendment No. 11 is a probing amendment. It concerns the different professional and legal roles of contractors and developer traders.

The background is that new section 44A is believed by some experts to have been devised to counter situations in which a developer acts merely as a building contractor to a landowner and is paid out of the proceeds of sale. Clearly, in many cases, a landowner will also want a developer's sales expertise to be made available. Such an arrangement could legitimately include a provision for the developer to act in that respect.

There must be certainty as to when a genuine contracting relationship coupled with sales advice is brought within the tax. A normal estate agent "introduces" a purchaser and "advises" whether the price offered should be accepted. While that does not immediately seem to encompass the concept of the word "request", a number of lawyers who are far more expert in these matters than I have suggested that the wording is not clear. The purpose of the amendment is to ask whether the Financial Secretary will be willing and able to help us to clarify the intention of the provision.

The Financial Secretary to the Treasury (Ruth Kelly)

I also welcome you to the Chair, Mr. McWilliam, and look forward to you being with us over the next few weeks and months. I look forward to debating amendments and clauses with the hon. Member for Hertford and Stortford (Mr. Prisk), who takes a deep and personal interest in these matters.

This amendment affects new section 44A, which prescribes the stamp duty land tax treatment of contracts where one party can direct or request that a conveyance of land is made to a third party. He is correct that new section 44A is there to ensure that stamp duty land tax is not avoided, especially in commercial transactions, by disguising what is in substance the purchase of land for development as a non-land transaction, often described as a "building licence". The Government believe that the tax treatment should reflect the substance. That is our policy on a variety of issues that are to be debated today.

The effect of the amendment would be to tempt taxpayers and their advisers to draft building licences that are still in substance the purchase of land but which provide that the developer will "request" rather than "direct" the landowner to convey to a third party. That would no doubt be the sort of request that it is hard to say no to.

Concern has been expressed about the interaction between new section 44A and existing section 44, dealing with contracts to be completed by a conveyance. I reassure the hon. Gentleman that section 44 remains the primary charging section where contracts for land transactions are substantially performed. In particular, the fact that a normal contract for sale includes a provision permitting the contracting purchaser to nominate someone else to take the conveyance does not take the contract out of section 44 into section 44A.

The hon. Gentleman mentioned the fact that section 44A may catch a contractor. I believe that it will not. It should not catch a person who genuinely acts only as an agent. I hope that with that reassurance he will withdraw the amendment.

Mr. Prisk

I am grateful to the Financial Secretary for that clarification. It helps. I think that she understands, as I am sure the Committee does, that one of the important purposes of the amendment was to put that clarification on the record. Given that she has done that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Prisk

I beg to move amendment No. 12, in schedule 37, page 510, leave out lines 2 to 5.

This is also a probing amendment. It seeks to clarify the sale and leaseback tax relief arrangements. Again, a number of professionals in the sector who have many years' experience have identified a potential problem with the provision, and I use the word "potential" with due care.

For the benefit of the Committee, the background is that section 57A was inserted into last year's Finance Bill on 12 November. Under the revisions to its text, certain relaxations are to be incorporated. The text is to take effect between 17 March this year and Royal Assent in July.

I understand that a temporary transition such as that means that conveyancers and solicitors involved will have to be very careful in the advice that they provide in researching the situation backwards, before advising their clients. That is quite an awkward problem, which arises because of the transition. It creates significant uncertainty and the regulations seem to be at variance with the tax treatment of such sale and leasebacks when assessing capital gains tax liabilities.

In relation to CGT base value reductions, there is only a part disposal of the interest originally held, with the economic value retained being left out of account, yet stamp duty land tax has been constructed differently. The purpose of the amendment is to ask: why the difference?

Ruth Kelly

The amendment seeks to remove an anti-avoidance provision in the Bill. The provision is designed to ensure that a taxpayer cannot obtain two reliefs: sub-sale relief when he on-sells land without taking title to it; and sale and leaseback relief, if the land is leased back to him by the sub-purchaser. The Government believe that sale and leaseback relief should apply only to the leaseback leg of a transaction where the seller has previously taken title to the property and has paid stamp duty land tax, or old stamp duty, on that acquisition.

In principle, we believe that it would be wrong for a taxpayer to be allowed to sub-sell land and not have a stamp duty land tax charge because of sub-sale relief and then also to take a leaseback of the land that he has sub-sold and claim leaseback relief. We believe that the taxpayer should choose either to sub-sell and pay stamp duty land tax on the leaseback to him, or to pay stamp duty land tax when he acquires the land and then enter into a sale and leaseback transaction and obtain relief on the leaseback. We do not think that he should be able to have it both ways.

Mr. Prisk

I understand what the Minister says about tax avoidance, but does she not also understand that the treatment of the same issue with two different taxes in two different ways is confusing for the taxpayer? What are the reasons behind it?

Ruth Kelly

The issue does not arise in the context of two taxes. The point is that it is possible to obtain two reliefs on the same transaction, which we want to avoid. We think that the tax treatment should follow the substance of the transaction, and that it is only right that only one relief should be allowable. I am sure that the hon. Gentleman would support us in that end.

Mr. Prisk

I suspect that we may differ on parts of the issue, but I accept that the Minister has clarified a couple of nuances in her second response that were not clear at the beginning. We could probably debate this all day, and while that might be tempting on occasions, in the present instance I beg to ask leave, to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Prisk

I beg to move amendment No. 14, in page 532, line 17, at end insert 'in the case of leases assigned within three years of grant'.

The Temporary Chairman

With this we may consider amendment No. 13, in page 534, line 29, leave out from beginning to end of line 7 on page 537.

Mr. Prisk

The amendment concerns cases in which there is an assignment of a lease treated as a grant of lease, as in paragraph 11. This part of the schedule is a reasonable measure, designed to prevent a landlord from getting a lease to an unconnected third-party tenant without the stamp duty land tax paid on the lease. Without the measure, somebody could grant a lease to a company within a group and obtain the benefit of intra-group relief from the tax. The lease I could subsequently be assigned to a tenant without the tax being paid. The tax would not be payable on an assignment of lease unless there was another consideration given—I presume that we are talking about cash or something similar.

The amendment would restrict the application of the rules to assignments taking place within three years of the grant of the lease. Both landlords and tenants—both sides of the property equation—have told me that they accept that this should be sufficient to counter avoidance. Without the amendment, an unnecessary compliance and tax burden will be placed on taxpayers taking an assignment of a lease where there is no real evidence of a tax avoidance motive.

We chose three years as the time limit partly because it reflects similar clawback provisions for other group reliefs, but I am open to suggestions from the Minister for a different time frame, if she chooses to respond positively. I believe, as do many people outside, that the amendment would improve the schedule and I look forward to a positive response.

Amendment No. 13 is more substantial. It concerns abnormal rents and relates to paragraphs 14 and 15. It would remove all the provisions relating to such rents. When the Minister, who was then the Economic Secretary, proposed the reform of stamp duty land tax, she said that the Government's aims were to simplify the tax and to "reflect modern commercial practice". These provisions not only fail in those aims but in many senses directly contradict them.

The provisions say that, when there is an increase of rent after the fifth year, the tenant must assess whether that increase is abnormal. Members of the Committee may be asking themselves what constitutes abnormality. The answer is in paragraph 15, but it is a very long answer, covering two pages of law, with three formulae and a six-step definition.

2.45 pm

For those who are unfamiliar with what the Government expect them to do as tenants, let me take them briefly—I hope to be as concise as possible—through the process. Tenants will first have to define the start date, which is the beginning of the period by reference to which the rent assumed to be payable after the fifth year of the term of the lease is determined in accordance with paragraph 7 (3)". Tenants then have to Divide the period between the start date and the date on which the new rent first becomes payable". We are then helpfully given two ways of doing that.

Then, for those poor tenants still struggling to work this out, step three comes along and tells them that they must Find the factor by which the retail prices index has increased over each period identified in step two. This is a figure expressed as a decimal and determined by the formula—

(RD—RI)/RI

where— RD is the retail prices index for the month in which the last day of the period in question falls, and RI is the retail prices index for the month in which the first day of the period in question falls.

At this point, it gets complicated. In step four, tenants are asked to Find the relevant factor for each period identified in step two. Hon. Members will realise that a rather awkward formula is coming up. Step four continues: This is a figure expressed as a decimal and determined by the formula—

1 + {0.05 × m/12}+ r

where— m is the number of months in the period in question (treating part of a month as a whole month), and r is the factor by which the retail prices index has increased over the period in question, determined under step three.

What could be simpler than that? However, we then find that the tenants have not completed what the Government require them to do to establish what an abnormal rent is. Indeed, no—there is far more to come, and those tenants who are still awake must proceed to step five, in which they are asked to Find the uplift factor for the reference period as follows. What follows is a helpful seven-paragraph definition.

Finally, we come to step six—for those tenants who are still awake and have not lost the will to live. Step six says: The rent increase is regarded as abnormal if the new rent is greater than:

R × UF

where— R is the rent previously taxed (see paragraph 14 (4)), and UF is the uplift factor for the reference period. There we have it. What, indeed, could be simpler?

When we debated this back in November, I said that Sir Humphrey would be proud, and I am sure he is. I recognise that some large organisations will probably be able to put in place systems that can handle the process, but everyone in the Committee will understand that the vast majority of tenants will find the provisions—the two pages, three formulae and six steps—unintelligible and unduly onerous.

Indeed, the Treasury itself could not get the formula right. When it was first printed, it was wrong, so it had to be pulped and reprinted, so how on earth is a humble taxpayer meant to cope?

Mr. John Redwood (Wokingham) (Con)

My hon. Friend is taking justifiable delight in setting out the complexities. Can he fathom how the uplift factor is derived? How can we be sure that it is appropriate, given that rents rise at different rates in different circumstances throughout the country, depending on the supply and demand in the market?

Mr. Prisk

As usual, my right hon. Friend has identified the point. The problem is in having an academic, theoretical set of formulae that conflicts entirely with the way in which the market works. That is at the heart of the error of the thinking underlying this proposal. Will the Financial Secretary assure businesses that any reasonable errors in the six-step, three-formula calculation will not lead to punitive fines?

There is a wider point of principle involved. Is it not inherently unfair that a tenant who faces a large inflationary rent rise—"abnormal" in the Government's language—for reasons outside their control should at the same time incur a substantial tax liability? Can the Financial Secretary explain in what possible way that is fair?

I cannot help taking a little delight at the language, because it merely reinforces the view that "Yes, Minister" is a training film and not a comedy, but in truth, this is a serious issue. With my amendments, I am trying to ensure that we keep the compliance burden at the lowest possible level. That is what is at issue here and I hope that the Financial Secretary will be able to explain to us why she is pressing ahead with this measure, which is absurd in purpose and unacceptable in practice.

The Temporary Chairman

For the sake of clarity, when we get past Amendment no. 14, I will invite the hon. Gentleman to put his second amendment formally if he wishes to press it to a Division.

Mr. Redwood

I have declared my interest in the register.

I am grateful to my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) for drawing attention to the enormous complexity that overlies the injustice of the measures. My party has been very unhappy about the Government's decision to introduce a new tax, masquerading as an old one, called stamp duty land tax and stamp duty, and it is typical of the Government that, having bungled that in the first place in regulations, they are now inviting us to re-enact it, but with crucial amendments in the light of experience and reconsideration, in such a gargantuan format in this bumper Finance Bill, which we have been picking our way through selectively and with difficulty yesterday and today on the Floor of the House.

The charge against the measure is one of drafting and of principle. My hon. Friend made it clear that absurd complexity and difficulty are involved. He kindly said that he feared that tenants might fall asleep before they got to the fifth or sixth stage of the calculation, but I think that they will be awake on caffeine tablets, tearing their hair out with extreme worry that they might get something wrong. Believe it or not—I know that the Government often do not—most of us want to comply with the tax laws and pay our fair taxes. However, it is getting very difficult these days for many people to know how to calculate their tax and to ensure that they have got it exactly right. It will be very unfair if the Revenue mistakes understandable error because of complexity for unwillingness to pay on the part of the many law-abiding people who will be wrestling with the legislation if we pass it in this form or something like it.

As my hon. Friend pointed out, there are three formulae. Anyone with a reasonable qualification in algebra will be able to handle that, but the people whom we are discussing have businesses to run, livings to earn, families to look after and elderly relatives to care for. They do not really want all this visited on them at the same time in order to try to comply. The Financial Secretary might grandly say, "Let them employ an accountant." I am all in favour of the professional classes doing well, but if someone is running a small business there are limits to how much they can afford to pay in professional fees for handling 550 pages of this Finance Bill, on top of the thousands of pages of tax and company legislation that we already have and that directors and executives are expected to be cognisant of, and capable of handling.

My hon. Friend is right to say that, on grounds of complexity and opacity, it would be good to strike this measure out or to come back with a paragraph or two that provides a sensible and more moderate explanation. However, I also have a problem with the measure in principle. As I suggested to my hon. Friend in my intervention, the property market is complicated and busy and there can be large changes in rentals after a five-year period for all sorts of reasons. The centres of towns change radically, and the centres of big cities can change even more. An area can plunge in estimation because uses and users change, or rise because of a major development, because of change in use or because a new group of rich or prosperous businesses or people comes into that district, which can justify higher rents. I hope that the formulae can fully reflect that sophistication and that people will not be penalised for extraneous forces that can move rents a lot for understandable and good reasons. The formulae and academic calculations can often be too abstract and unfair

My final point is that I do not like the tax, which is yet another stealth tax, at all. The market economy worked perfectly well without it, but we all know why it is necessary: because the Government are wasting so much money. A much better answer would be to reduce Government waste rather than burdening all of us, and the many businesses out there struggling to earn a living in a globally competitive marketplace, with this high degree of complexity and, ultimately, cost. I welcome the bold attempt of my hon. Friend to simplify the measure and would heartily like to see the back of the tax altogether.

Ruth Kelly

I thank the hon. Member for Hertford and Stortford (Mr. Prisk) for the reasonable way in which he introduced amendment No. 14, although the same does not apply to amendment No. 13.

Amendment No. 14 affects paragraph 11 of new schedule 17A, which provides that, where the grant of a lease is exempt from the charge of stamp duty land tax by virtue of certain statutory provisions, the first non-exempt assignment of the lease is treated as the grant of a new lease. That ensures that stamp duty land tax is paid at some stage on the rental element. To his credit, the hon. Gentleman accepts the case for trying to prevent avoidance and ensuring that a bank of leases is not built up, then assigned later on down the road. Without that provision, any property-owning group could set up a bank of leases within the group in the knowledge that, sometime later, it could enter transactions with tenants that were in substance grants of leases, but in legal form assignments of existing leases, thus enabling the tenant to avoid stamp duty land tax on the rental element.

My problem with the amendment is that it merely postpones that practice for a three-year period and, after three years, enables the tax to be avoided. I could not condone that. There should not be a time limit after which tax avoidance is acceptable, so I ask the hon. Gentleman to reconsider setting in stone a three-year period after which such a practice would become acceptable. Perhaps I can reassure him that paragraph 11 applies only to leases granted on or after 1 December 2003, so there is no question of the assignment of a lease being treated as the grant of a new lease when the grant of the lease was within the old stamp duty regime.

The hon. Gentleman considers amendment No. 13 substantive. It would strike out, as he put it, provisions relating to abnormal rents. I should first emphasise that no tenant can possibly be affected by the provisions in paragraphs 14 and 15 of new schedule 17A until December 2008 at the earliest, because they apply only to leases that, when granted, are within the stamp duty land tax system. I also emphasise that the normal rule for stamp duty land tax purposes is that rent increases after the end of the fifth year are ignored completely. In particular, no one paying tax on the grant of a lease need take post-five-year rent increases into account, either in submitting an initial return or if the return needs to be revised when the rent for the first five years is ascertained.

Mr. Prisk

Given those points, just how many people will be directly affected by the measure? If only a very small number of people will be liable, the problem is that a very much larger number will be anxious that they might be and therefore have to deal with the compliance burden in terms of their time and money. Can the Financial Secretary tell us how many people—what proportion of tenants—will be affected? If it is a tiny number, surely that reinforces our argument to get rid of the measure altogether.

Ruth Kelly

I assure the hon. Gentleman that the vast majority of leases, such as those providing for retail prices index increases, will be completely unaffected by the provisions. We are talking about a small number. [Interruption.] He asks from a sedentary provision why, therefore, we do not strike out the provisions. The answer is that, if no provision were made for abnormal rent increases, it would be in the interest of parties to negotiate a nominal rent for the first five years and then a very high rent increase in year six and thereafter. I am sure that he would not want that to happen.

3 pm

Mr. Prisk

I do not understand the logic of the argument, which is that people are trying to organise their tenancy arrangements on that basis. Such an attitude involves an unnecessarily suspicious mindset. I am not naive enough to suggest that no one would try to do such things at the margins, but given that the Financial Secretary has already told the Committee that a tiny number of people are involved—presumably, a tiny sum would therefore be recouped in terms of tax avoidance—in the name of the apparent aim of this tax, which is modern commercial practice, we could surely get rid of two pages of gibberish.

Ruth Kelly

I beg to differ with the hon. Gentleman. First, the provision is not gibberish; secondly, it has a serious purpose, which is to put people on notice that they cannot reach an agreement that provides for a nominal rent during the first five years and a very sharp increase thereafter. We have to make it clear that we cannot tolerate such a situation. Only when the rent increases after the end of year five will tenants need to consider this situation at all. As the hon. Gentleman rightly points out, given that such people are on notice that tax cannot be avoided in this way, only very few will be affected by the provision. Of course, if it were not included in the Bill, a much greater number might be affected as the practice became more widespread. It is essential to include such a measure in the Bill to give people the required notice not to enter into such agreements.

The hon. Gentleman is trying to make a name for himself through his fondness for reading formulae from stamp duty provisions in regulations and Bills. He tries to make out that the formula is extremely complicated and that no reasonable tenant could possibly conclude whether their rent increase is normal. In fact. it is a fairly simple formula of—at the moment—RPI plus 5 per cent. The Inland Revenue intends to provide an online calculator for those who wish to calculate the figure in that way. Such a calculation is not a particularly onerous one for a tenant in that situation. We shall of course maintain an interest in stamp duty land tax issues between now and 2008, and we will always be ready and willing to introduce improvements to the legislation where they are justified. However, removing such provisions altogether and failing to replace them with anything that improves matters is unacceptable. I therefore ask the Committee to reject the amendment.

Mr. Prisk

I am grateful to the Financial Secretary for that explanation. May I clarify one point, Mr. McWilliam? Do you require me formally to move the amendment?

The Temporary Chairman

We have to dispose of amendment No. 14 before we get to amendment No. 13, which has not yet been put. Once we have disposed of amendment No. 14, I shall invite the hon. Gentleman to propose amendment No. 13 formally, if he wishes to press it to a vote.

Mr. Prisk

I have listened to the Financial Secretary's comments on amendment No. 14 and, although I am disappointed that she seems alone among professionals in the field in her interpretation of it, it would not be appropriate at this stage to press it to a vote. I hope that the Government have listened to the arguments and will improve the Bill in their future refining process. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 13, in page 534, line 29, leave out from beginning to end of line 7 on page 537.— [Mr. Prisk.]

Question put, That the amendment be made:—

The Committee divided: Ayes 127, Noes 336.

Division No. 152]	[3:04 pm
AYES
Ainsworth, Peter (E Surrey)	Campbell, Gregory (E Lond'y)
Amess, David	Chope, Christopher
Arbuthnot, rh James	Cormack, Sir Patrick
Bacon, Richard	Cran, James (Beverley)
Barker, Gregory	Curry, rh David
Baron, John (Billericay)	Djanogly, Jonathan
Beggs, Roy (E Antrim)	Dodds, Nigel
Bellingham, Henry	Donaldson, Jeffrey M.
Bercow, John	Dorrell, rh Stephen
Beresford, Sir Paul	Duncan, Alan (Rutland)
Boswell, Tim	Duncan, Peter (Galloway)
Bottomley, Peter (Worthing W)	Duncan Smith, rh lain
Bottomley, rh Virginia (SW Surrey)	Fabricant, Michael
	Fallon, Michael
Brady, Graham	Field, Mark (Cities of London & Westminster)
Brazier, Julian
Browning, Mrs Angela	Flight, Howard
Burns, Simon	Flook, Adrian
Burnside, David	Forth, rh Eric
Burt, Alistair	Francois, Mark

Gamier, Edward	Osborne, George (Tatton)
Gibb, Nick (Bognor Regis)	Page, Richard
Gillan, Mrs Cheryl	Paice, James
Goodman, Paul	Paisley, Rev. Ian
Gray, James (N Wilts)	Prisk. Mark (Hertford)
Grayling, Chris	Randall, John
Green, Damian (Ashford)	Redwood, rh John
Greenway, John	Robathan, Andrew
Gummer, rh John	Robertson, Hugh (Faversham & M-Kent)
Hague, rh William
Hammond, Philip	Robertson, Laurence (Tewk'b'ry)
Hawkins Nick	Robinson, Mrs Iris (Strangford)
Hayes, John (S Holland)	Robinson, Peter (Belfast E)
Heald Oliver	Roe, Mrs Marion
Heathcoat-Amory, rh David	Rosindell, Andrew
Hendry, Charles	Ruffley, David
Hermon, Lady	Shepherd, Richard
Hoban, Mark (Fareham)	Simmonds, Mark
Hunter, Andrew	Simpson, Keith (M-Norfolk)
Jack, rh Michael	Smyth, Rev. Martin (Belfast S)
Jackson, Robert (Wantage)	Spelman, Mrs Caroline
Jenkin Bernard	Spicer, Sir Michael
Johnson, Boris (Henley)	Spink, Bob (Castle Point)
Key, Robert (Salisbury)	Spring, Richard
Kirkbride, Miss Julie	Stanley, rh Sir John
Laing, Mrs Eleanor	Steen, Anthony
Lait, Mrs Jacqui	Streeter, Gary
Lansley, Andrew	Swayne, Desmond
Leigh, Edward	Swire, Hugo (E Devon)
Letwin, rh Oliver	Tapsell, Sir Peter
Lewis, Dr. Julian (New Forest E)	Taylor, John (Solihull)
Liddell-Grainger, Ian	Trimble, rh David
Lidington, David	Turner, Andrew (Isle of Wight)
Luff, Peter (M-Worcs)	Tyrie, Andrew
McIntosh, Miss Anne	Viggers, Peter
Maclean, rh David	Waterson, Nigel
McLoughlin, Patrick	Watkinson, Angela
Maples, John	Whittingdale, John
Maude, rh Francis	Wiggin, Bill
Mawhinney, rh Sir Briar	Willetts, David
May, Mrs Theresa	Wilshire, David
Mercer, Patrick	Winterton, Ann (Congleton)
Mitchell, Andrew (Suitton Coldfield)	Yeo, Tim (S Suffolk)
	Young, rh Sir George
Moss, Malcolm	Tellers for the Ayes:
Murrison, Dr. Andrew	Mr. Peter Atkinson and
Norman, Archie	Mr. Geoffrey Clifton-Brown>

NOES
Adams, Irene (Paisley N)	Brake, Tom (Carshalton)
Ainger, Nick	Breed, Colin
Ainsworth, Bob (Cov'try NE)	Brennan, Kevin
Allen, Graham	Brooke, Mrs Annette L.
Anderson, rh Donald (Swansea E)	Brown, rh Nicholas (Newcastle E Wallsend)
Anderson, Janet (Rossendale & Darwen)
	Brown, Russell (Dumfries)
Armstrong, rh Ms Hilary	Browne, Desmond
Atkins, Charlotte	Bryant, Chris
Austin, John	Buck, Ms Karen
Bailey, Adrian	Burden, Richard
Baker, Norman	Burgon, Colin
Barnes, Harry	Burnett, John
Barrett, John	Burnham, Andy
Barron, rh Kevin	Byers, rh Stephen
Bayley, Hugh	Caborn, rh Richard
Beard, Nigel	Cairns, David
Begg, Miss Anne	Calton, Mrs Patsy
Beith, rh A. J.	Campbell, Alan (Tynemouth)
Benton, Joe (Bootle)	Campbell, Mrs Anne (C'bridge)
Betts, Clive	Campbell, rh Sir Menzies (NE Fife)
Blears, Ms Hazel
Blizzard, Bob	Campbell, Ronnie (Blyth V)
Blunkett, rh David	Carmichael, Alistair
Bradley, rh Keith (Withington)	Casale, Roger
Bradley, Peter (The Wrekin)	Caton, Martin

Challen, Cohn	Havard, Dai (Merthyr Tydfil & Rhymney)
Chapman, Ben (Wirral S)
Chaytor, David	Heath, David
Chidgey, David	Henderson, Doug (Newcastle N)
Clapham, Michael	Henderson, Ivan (Harwich)
Clark, Mrs Helen (Peterborough)	Hendrick, Mark
Clarke, rh Tom (Coatbridge & Chryston)	Heppell, John
	Hesford, Stephen
Clarke, Tony (Northampton S)	Hewitt, rh Ms Patricia
Clelland, David	Heyes, David
Coaker, Vernon	Hinchliffe, David
Coffey, Ms Ann	Holmes, Paul
Coleman, lain	Hood, Jimmy (Clydesdale)
Connarty, Michael	Hope, Phil (Corby)
Cooper, Yvette	Hopkins, Kelvin
Corbyn, Jeremy	Howarth, rh Alan (Newport E)
Corston, Jean	Howarth, George (Knowsley N & Sefton E)
Cotter, Brian
Cousins, Jim	Hughes, Kevin (Doncaster N)
Crausby, David	Hughes, Simon (Southwark N)
Cruddas, Jon	Humble, Mrs Joan
Cryer, Ann (Keighley)	lddon, Dr. Brian
Cryer, John (Hornchurch)	Illsley. Eric
Cummings, John	Jackson, Glenda (Hampstead & Highgate)
Cunningham, Jim (Coventry S)
Cunningham, Tony (Workington)	Jackson, Helen (Hillsborough)
Curtis-Thomas, Mrs Claire	Jamieson, David
Davey, Edward (Kingston)	Johnson, Alan (Hull W)
Davey, Valerie (Bristol W)	Jones, Helen (Warrington N)
David, Wayne	Jones, Jon Owen (Cardiff C)
Davidson, Ian	Jones, Kevan (N Durham)
Davies, rh Denzil (Llanelli)	Jones, Lynne (Selly Oak)
Davies, Geraint (Croydon C)	Jones, Martyn (Clwyd S)
Dawson, Hilton	Jones, Nigel (Cheltenham)
Dean, Mrs Janet	Joyce, Eric (Falkirk W)
Denham, rh John	Kaufman, rh Gerald
Dismore, Andrew	Keeble, Ms Sally
Dobbin, Jim (Heywood)	Keen, Alan (Feltham)
Dobson, rh Frank	Keen, Ann (Brentford)
Donohoe, Brian H.	Keetch, Paul
Doran, Frank	Kelly, Ruth (Bolton W)
Doughty, Sue	Kemp, Fraser
Dowd, Jim (Lewisham W)	Khabra, Piara S.
Drew, David (Stroud)	Kilfoyle, Peter
Drown, Ms Julia	King, Andy (Rugby)
Dunwoody, Mrs Gwyneth	Kumar, Dr Ashok
Eagle, Angela (Wallasey)	Lamb, Norman
Edwards, Huw	Lammy, David
Efford, Clive	Lawrence, Mrs Jackie
Ellman, Mrs Louise	Laxton, Bob (Derby N)
Ennis, Jeff (Barnsley E)	Lazarowicz, Mark
Ewing, Annabelle	Lepper, David
Farrelly, Paul	Levitt, Tom (High Peak)
Field, rh Frank (Birkenhead)	Lewis, Teny (Worsley)
Fisher, Mark	Liddell, rh Mrs Helen
Fitzpatrick, Jim	Linton, Martin
Fitzsimons, Mrs Lorna	Llwyd, Elfyn
Flint, Caroline	Love, Andrew
Foster, rh Derek	Lucas, Ian (Wrexham)
Foster, Don (Bath)	Luke, lain (Dundee E)
Foster, Michael (Worcester)	McAvoy, Thomes
Foulkes, rh George	McCabe, Stephen
Francis, Dr. Hywel	McDonagh Siobhain
Gapes, Mike (Ilford S)	MacDonald, Calum
George, Andrew (St. Ives)	McDonne[...]l, John
George, rh Bruce (Walsall S)	MacDougall, John
Gerrard, Neil	McFall, John
Gidley, Sandra	McGuire, Mrs Anne
Godsiff, Roger	Mclsaac, Shona
Green, Matthew (Ludlow)	McKechin Ann
Griffiths, Win (Bridgend)	McKenna, Rosemary
Grogan, John	Mackinlay Andrew
Hall, Mike (Weaver Vale)	Mactagga[...]t, Fiona
Hall, Patrick (Bedford)	McWalter, Tony
Hanson, David	Mahon, Mrs Alice
Harvey, Nick	Mallaber, Judy

Mendelson, rh Peter	Short, rh Clare
Mann, John (Bassetlaw)	Simon, Siôn (B'ham Erdington)
Marsden, Gordon (Blackpool S)	Simpson, Alan (Nottingham S)
Marshall, Jim (Leicester S)	Singh, Marsha
Marshall-Andrews, Robert	Skinner, Dennis
Martlew, Eric
Meacher, rh Michael	Smith, rh Andrew (Oxford E)
Merron, Gillian	Smith, Angela (Basildon)
Michael, rh Alun	Smith, Geraldine (Morecambe & Lunesdale)
Milburn, rh Alan
Miller,Andrew	Smith, Jacqui (Redditch)
Mitchell, Austin (Gt Grimsby)	Smith, Llew (Blaenau Gwent)
Moffatt, Laura	Smith, Sir Robert (W Ab'd'ns & Kincardine)
Mole, Chris
Moonie, Dr. Lewis	Soley, Clive
Moore, Michael	Southworth, Helen
Morgan, Julie	Squire, Rachel
Mountford, Kali	Starkey, Dr. Phyllis
Mudie, George	Steinberg, Gerry
Mullin, Chris	Stevenson, George
Munn, Ms Meg
Murphy, Jim (Eastwood)	Stinchcombe, Paul
Murphy, rh Paul (Torfaen)	Stoate, Dr. Howard
Naysmith, Dr Doug	Strang, rh Dr. Gavin
Norris, Dan (Wansdyke)	Stringer, Graham
Oaten, Mark (Winchester)	Stuart, Ms Gisela
Olner, Bill	Stunell, Andrew
Öpik, Lembit	Tami, Mark (Alyn)
Osborne, Sandra (Ayr)	Taylor, Dari (Stockton S)
Owen, Albert	Taylor, David (NW Leics)
Palmer, Dr. Nick	Taylor, Matthew (Truro)
Perham, Linda	Taylor, Dr. Richard (Wyre F)
Picking, Anne	Thomas, Gareth (Clwyd W)
Pickthall, Colin	Thomas, Simon (Ceredigion)
Pike, Peter (Burnley)
Plaskitt, James	Thurso, John
Pollard, Kerry	Timms, Stephen
Pope, Greg (Hyndburn)	Tipping, Paddy
Pound, Stephen	Todd, Mark (S Derbyshire)
Prentice, Ms Bridget (Lewisham E)	Tonge, Dr. Jenny
	Touhig, Don (IsIwyn)
Price, Adam (E Carmarthen & Dinefwr)	Trickett, Jon
	Truswell, Paul
Primarolo, rh Dawn	Turner, Dr. Desmond (Brighton Kemptown)
Prosser, Gwyn
Pugh, Dr. John	Twigg, Derek (Halton)
Purchase, Ken	Twigg, Stephen (Enfield)
Quinn, Lawrie
Rapson, Syd (Portsmouth N)	Tyler, Paul (N Cornwall)
Raynsford, rh Nick	Tynan, Bill (Hamilton S)
Reed, Andy (Loughborough)	Vaz, Keith (Leicester E)
Reid, Alan (Argyll & Bute)	Walley, Ms Joan
Robertson, Angus (Moray)	Ward, Claire
Robertson, John (Glasgow Anniesland)	Wareing, Robert N.
	Watson, Tom (W Bromwich E)
Robinson, Geoffrey (Coventry NW)	Watts, David
	Webb, Steve (Northavon)
Roche, Mrs Barbara	Weir, Michael
Rooney, Terry
Ross, Ernie (Dundee W)	White, Brian
Roy, Frank (Motherwell)	Whitehead, Dr. Alan
Ruane, Chris	Wicks, Malcolm
Ruddock, Joan	Williams, rh Alan (Swansea W)
Russell, Bob (Colchester)	Williams, Hywel (Caernarfon)
Russell, Ms Christine (City of Chester)	Williams, Roger (Brecon)
	Willis, Phil
Ryan, Joan (Enfield N)
Salmond, Alex	Winnick, David
Salter, Martin	Winterton, Ms Rosie (Doncaster C)
Sanders, Adrian
Sarwar, Mohammad	Wisher, Pete
Savidge, Malcolm	Woodward, Shaun
Sawford, Phil	Woolas, Phil
Sedgemore, Brian	Worthington, Tony
Shaw, Jonathan	Wright, Anthony D. (Gt Yarmouth)
Sheridan, Jim

Wright, David (Telford)	Tellers for the Noes:
Wyatt, Derek	Margaret Moran and
Younger-Ross, Richard	Paul Clark

Question accordingly negatived.

Question proposed, That this schedule be the Thirty-seventh schedule to the Bill.

Mr. Prisk

It is disappointing that the Division was unsuccessful from our point of view, but it is important that we made the point.

Schedule 37, together with clause 282, re-enacts temporary provisions concerning the detailed implementation of stamp duty land tax on leases. It also makes a series of changes, corrections and revisions to the legislation. Part 1 of the schedule makes changes to the Finance Act 2003. Indeed, it makes 35 pages of such changes—and only nine months after the Act came into force. In many ways, that shows how the original legislation was ill considered in its preparation and enacted in haste.

I am well aware that the Chief Secretary told us last year that the legislation would need "refining"—I think that that was his term—over the next couple of years, but I have to say that this scale of refining is ridiculous. Such a piecemeal approach to a tax creates bad tax law by increasing the complexity, which results in greater uncertainty not only for the taxpayer but for the tax collector. It also undermines the Government's own arguments on tax avoidance. After all, if tax law is constantly changing, it is far more likely to result in loopholes. Inevitably, the Government have to come back the next year to fill them—and on we go with the ridiculous and vicious cycle.

Given the 35 pages of changes, we could be forgiven for thinking that the Government had sorted everything out. I wish that that were true, but problems and unfulfilled commitments remain. I shall give an example, and I hope that the Financial Secretary will be able to respond, as it relates to what is at the heart of the schedule.

I have been approached by a number of expert solicitors in this field, including solicitors belonging to the firm Wards of Bristol. They have been concerned by the commitments made by the Chief Secretary to the Treasury about chain-breaking companies. The representations arrived only in the past couple of days, which means that I have not had time to table an appropriate amendment.

On 10 June 2003, the Chief Secretary to the Treasury told the Standing Committee considering last year's Finance Bill: 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."—[Official Report, Standing Committee B, 10 June 2003; c. 415.]

Amendments were duly tabled. Schedule 6A to the Finance Act 2003, when finalised, addressed many of the needs of chain-break schemes. However, a raft of different constraints remain, contrary to the Chief Secretary's commitment in Standing Committee. As a result, many transactions in this area operate with a double charge, as I shall show in three short examples.

First, the current requirement for a chain to have broken down prevents the creation of a completed chain by taking out a prospective buyer who has not yet put his property on the market. Secondly, the requirement in the legislation that the vendor, apparently simultaneously, should acquire another property as his main residence prevents chain-break companies from buying from people who need to go into nursing care; who may be under going divorce; or who are threatened with repossession. Finally, the restriction that the property must have been occupied as a main residence in the past two years prevents the purchase, for example, from someone who has been in a nursing home for an extended period; or from someone trying to get out of the buy-to-let market; or from someone who has been working abroad and who is looking to make the move permanent.

I hope that the Financial Secretary will consider these important matters. The proposals being considered today should have been contained in last year's Bill. What progress has been made in ensuring that the provisions introduced last year are corrected? The Chief Secretary made a clear commitment in relation to these matters, and I hope that it will now be fulfilled.

A raft of other problems have been caused by the Government's piecemeal approach. I gather that statutory instrument No. 1069 was introduced earlier this month, but that it has had to be corrected by a new provision. That highlights the Government's piecemeal and ad hoc approach to making tax law.

Finally, it is clear that this remarkably opaque tax has been very badly prepared. Today, we are considering 35 pages of changes that have been needed in less than a year, and that serves to prove my point. The various amendments to schedule 37 that the Committee considered today were tabled with the aim of improving the legislation. However, the Opposition want to put on record our concern about the impact of the tax, and our strong rejection of the Government's ad hoc and piecemeal approach to its enactment.

Mr. Redwood

My main concern about allowing schedule 37 to stand part of the Bill is that it contains 35 pages of extremely complicated provisions in respect of a new tax introduced by the Government very recently and in a rush. The schedule represents a series of wholesale amendments to the Finance Act 2003, of recent memory, and it also amends amending statutory instruments that had to be introduced in-year because of the mess that was made of the original legislation.

The 35 pages of schedule 37 are followed by the 15 pages taken up by schedules 38 and 39, which also deal with the same tax. That means that the House is being invited to agree some 50 pages of legislation in the space of perhaps an hour, in respect of a very new and badly designed tax whose introduction was bungled and badly explained a year ago. The tax warrants a Bill all to itself, with a proper Committee procedure. That might help the Government grope their way towards the proper introduction of an enormously complex tax. The Government designed it badly, and they have to revise it every six months to respond to the complexity of a marketplace that surprises them with its constant rises.

Mr. John Bercow (Buckingham) (Con)

I am very grateful to my right hon. Friend for giving way because he is a respected veteran of these debates in Committee. Can he tell me what compatibility exists, if any, between schedule 37 and the tax law rewrite project, conducted under the auspices of the tax simplification panel, which is regularly and enthusiastically championed by the Government?

Mr. Redwood

I believe there is little or no relationship or connection. As I understand the rewrite and simplification, its intention is not to change the incidence or the impact of the legislation in any way, whereas today the Government, by rushing through these schedules, are seeking to make quite substantial changes in something that they designed a little over a year ago, legislated for in haste, re-legislated for in statutory instrument form and are now seeking to legislate for again. It is a very different exercise. Simplification would be very welcome, but I think even the best brains in the country would be unable to boil these schedules down to many fewer pages than we currently have before us, because they are ill thought through and badly designed. Even the most brilliant prose stylist in the world would be unable to condense into a reasonable space something that is so ill thought through and badly designed, because the whole point of it is that it is ghastly and complex and prolix and tedious and contradictory and inaccurate, and doubtless will need amending in subsequent regulations and in subsequent Finance Bills.

I admire the wit and wisdom of the officials involved in all this because it is clearly a lifelong task to keep bringing things back to the House in the vain hope that one day they will hit on the right solution—that one day we may have a stamp duty land tax of which Ministers can be proud, that one day there may be a lucky Minister who is allowed to come to the House and say, "Good news: we do not have to legislate again on this. We have at last succeeded." But so far Ministers have had to come to the House and say, "I know I was here last year doing this, but it is not Groundhog day; we are not doing the same again, we are doing something very different. The intention is still the same but we have discovered that what we did last time was fundamentally wrong." I know that the Committee would not like me to go into all the detail in these 35 pages, but hon. Members should at least be aware how fundamental are many of the issues that have to be re-legislated for in this extraordinary way.

We have to look again at contracts providing for conveyances to a third party—an extremely wide category under this legislation. We have to consider the effect of transfer rights. We have to consider registration of land transactions. We have to redefine the effective date of the transaction—a pretty fundamental thing, which one would have thought the Government would have got right to start with. We have to look at chargeable consideration—in other words, how much these things cost in the first place. We have to look at general provisions relating to leases. We have to look at rent reviews. We have to look at the assignment of agreements for leases and we have to look at lease agreements. We have to look at commencement.

Then in part 2 we get to the really juicy bit where we are amending amendments—where we are amending regulations under section 109 of the Finance Act 2003, which were designed to deal with the problems in the first place. There we have to deal with introduction and revocation—if only we were revoking the whole thing, it would save us a lot of time. We have to look at the meaning of taking possession. We have to look at relief for sale and leaseback arrangements—a fundamental point. To stay in business in a competitive market, an awful lot of businesses finance themselves by sale and leaseback, and we now discover that the provisions were wrongly drafted and some people are being unreasonably penalised and the Treasury is not getting what it thinks it should get.

We have to look at relief for acquisitions of residential property that were never meant to be captured by this thing in the first place; there is a very complicated new piece on that. We have to look at acquisition by a property trader from personal representatives. We have to look at the chain of transactions point that my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) rightly highlighted. We have to look at relocation of employment cases. We have to redefine what a property trader is, which is pretty fundamental, as property traders are the people who are most likely to be tied up in these knots regularly.

We have to look at the meaning of "refurbishment" and "the permitted amount" because there are exemptions for that kind of practice under the legislation. We have to look at the particular position of unit trust schemes, which have been caught out in a way that the Government obviously did not intend. We have to look at linked transactions. We have to look at declarations by persons authorised to act on behalf of others. We even—and this is my favourite—have to change the meaning of "lease". One might have thought that when the Government set out to tax leases, they would start off with a definition, go out to consultation on it, agree it and stick with it. But no, apparently they even got that wrong, and we now need a new definition of a lease.

Mr. Prisk

rose—

Mr. Redwood

I see my hon. Friend has a thirst for knowledge.

Mr. Prisk

My thirst for knowledge is unquenchable, so I have been interested to hear the range and scope that my right hon. Friend is highlighting and which I have had to deal with directly. Is he aware that the most sinister aspect of all this, which is in another large tome, the Red Book, may be that the Government expect a 25 per cent. increase in the yield of the tax—£1.9 billion in one year? Does he share my concern that tucked away behind this panoply of nonsense is a much more worrying issue?

Mr. Redwood

My hon. Friend is ahead of me in my argument. I had done the Minister the justice, or the injustice, of assuming that most of the schedule dealt with bungles, but my hon. Friend is right—some of it is an intentional tightening up, almost tantamount to a new tax in some cases, which the Minister should highlight if she wishes to intervene in this important debate.

We are invited to legislate anew on "Treatment of leases for indefinite term", on "First rent review in final quarters of fifth year", on "Adjustment where rent ceases to be uncertain", on "Rent for overlap period in case of grant of further lease", and on "Cases where assignment of lease treated as grant of lease". Then there is more on agreement of leases under the amending amendments; more on assignment of agreement of leases; and more on increases in rentals and the abnormal rent business that we were discussing just before the stand part debate. That, as we saw in that moderate debate of some one hour's duration, posed a great many problems in its own right, most of which the Minister did not care to answer when she replied to the points that my hon. Friend and I had made.

The schedule needs rather more time and attention. It would be a courtesy to the Committee if the Minister, when replying to the debate, could make an honest declaration of which paragraphs of the schedule are being amended because there were errors, problems and drafting difficulties, and which are being amended because those who have to pay the tax have succeeded in making representations to the effect that it is was unworkable or unfair and one or two aspects are moving in the direction of the users, as with unit trusts in some cases. Most important, I hope the Minister will highlight to the Committee where the definitions and the text are being deliberately strengthened in order to increase the amount of revenue that the Government are raising, in the light of experience in the first year of the introduction of the tax.

That is what most matters to the Committee and the House. It is wrong that all these changes are being slipped through in the schedule in the hope that there will not be much debate. It amounts to revisiting a new tax in a pretty fundamental way, and I hope the Minister will illuminate our debate by confessing to the errors, highlighting any good news that may be hidden in the schedule for people who currently have to pay the tax, and above all highlighting in an open way to the Committee where the burden will increase. It is not clear to the lay reader where that £1.5 billion or more will come from. Some of it will clearly come from changes to drafting, rather than from the expansion of the economy.

3.30 pm

Mr. John Gummer (Suffolk, Coastal) (Con)

The complexity of the changes, and the extensive nature of the amendments and the amendments to amendments may be construed as a fundamental criticism of a taxation system that is supposed to be understood by pretty ordinary people. We are discussing leases, which are often an important subject for businesses that are not huge and do not have vast arrays of advisers, helpers and people with detailed knowledge.

I much honour the Minister who is to reply. I sit on a committee with her and I hear her express ideas simply, coherently and cogently. Indeed, I often agree with her, and I do not think I have ever disagreed with her, on that committee. [Interruption.] This may be very dangerous for her career, but I have certainly understood what she has had to say. It must be extremely embarrassing for her to appear before this Committee faced with a series of amendments on which she must have spent a great deal of time with her civil servants, going through each of the details to ensure that she could explain not only to our satisfaction but to her own what they really meant.

That is an unacceptable position. Of course, there are complicated matters that need complex legislation, but such legislation itself demands that one gets things right in the first place. I think that the tax that we are considering is unacceptable. I suppose that I have a sort of interest in addition to what I have set out in my declaration of interests, to which I refer the Committee, in that I write on matters of property. I find it difficult to see that this is a very helpful tax. It affects me directly, but I do not see that it is helpful as far as the economic future of the country is concerned. Even if it were helpful in that context, the fact that it is incomprehensible to the ordinary person brings into considerable doubt the taxation system as a whole.

I plead with the Financial Secretary to recognise the seriousness of what we are discussing. Yesterday, I made a short intervention about a proposal aimed at very small companies that had only recently been incorporated. Anyone who listened to that debate would have recognised that what was happening was totally incomprehensible to anyone who was likely to be running a small company. We are now seeing a series of amendments to the system that must be utterly incapable of being understood by the very people whom we are supposed to be encouraging. It is not fair that the most difficult thing in running a business is dealing with the Government. That should not be the situation. The most difficult thing in running a business should be making a profit; that is what people should be concentrating on and concerned with. This Government are making it more difficult to run a business by insisting on a taxation system that is as opaque as they can make it.

There are three points with which I would like the Financial Secretary to deal. First, is it not true that the tax is being introduced because the Chancellor did not dare introduce a sensible, direct tax that everybody knew about? Is this not one of those examples of the Chancellor trying to invent a tax that is so complex and so particular in its incidence that people will not notice it enough to say, "There you go again; taxes are going up"? We know who will pay the price; it is not the businesses who pay the tax in the first instance, but the customers of those businesses. The Financial Secretary is shaking her head, but it is true. She is paying for it, as am I. Indeed, we are all paying for it in the goods and services provided by the businesses that are now taxed by what I understand to be an additional £1.7 billion, or an amount of amount that size.

Mr. Prisk

It is —1.9 billion.

Mr. Gummer

It is —1.9 billion that the Chancellor is taking out of the pockets of the people of this country. That is what this is about. It is all right for the Financial Secretary to shake her head so elegantly, but the truth is that she knows very well that there is no one else to pay the money. In the end, all taxes are paid by the consumer and the customer. If —1.9 billion is taken out of the system it is taken not from a mythical collection of rich people or a series of property speculators who can be cut off from the rest of the community, but from the pockets of the purchasers of goods and services. This tax is complicated in order to uphold the fiction, which the public increasingly recognise as a fiction, that the Government are not a tax-and-spend Government. Of course they are a tax-and-spend Government, however polite and charming their front may be. The Financial Secretary must defend this tax in terms of its being a straightforward imposition that we an all understand.

My second question, which my right hon. Friend the Member for Wokingham (Mr. Redwood) raised earlier, arises in the stand part debate because this is the moment at which we give credence to the amendments. Will the Financial Secretary distinguish between the amendments to obtain more money and the amendments that were made because she got the provision wrong in the first place? I do not blame her for getting the provision wrong, and, unlike certain Ministers of the Crown, I am not prepared to blame civil servants. I was brought up in an old -fashioned way, so I blame Ministers—I expected to take the blame when I was a Minister.

I shall blame the person who is really responsible, the Chancellor of the Exchequer. He must explain, through his voice, the Financial Secretary. which is the mea culpa bit and which the "mea grab-a bit." Which bits is he apologising for, and which bits is he preceding with the word "sorry" before taking some more? That distinction is not included in any of the explanatory memorandums, and I am sorry that that should be so. I have read the explanatory memorandums carefully, because it is difficult to read the Bill, and one needs the explanations. None of the explanatory memorandums states, "We got these things wrong, and we are now going to get them right. We are also introducing this provision, which means that we will raise a great deal of money. We want to explain the Red Book properly."

Thirdly, will the Financial Secretary explain to whom my constituents affected by this gobbledegook should apply—at no cost, because it is not their fault—for specific advice on how the changes will affect them and their businesses? If she does not introduce free help, she will act as a recruiting sergeant for those overpaid people—I nearly called them a profession—chartered accountants. The Government have given more money to chartered accountants than any Government in the history of mankind. Ministers do not need to include that point in their declaration of interests, but they ought to—members of the chartered accountancy profession have more treasure than is imaginable, because they have earned so much and, given recent events and examples, I doubt whether one can trust them.

The Financial Secretary must explain who will advise those who do not want to spend money, in addition to the tax that is being extorted, to make sure that they do not break the law. The problem is that one seeks professional advice not only to minimise the tax that one legally ought to pay, but to ensure that one does not get caught in a taxation system that is so complex and irrational that one would not imagine that one was doing wrong, and that proposition is central to our argument.

It is wrong to put people in the wrong by introducing legislation that is so irrational and unconnected with anybody's natural assertions and thoughts that people would not imagine that they are doing something incorrect. It is wrong to set out to have a taxation system that is designed to hide the fact that anybody is being taxed, to design the mechanism to be as complex as possible so as not to have to admit to raising taxes, and to promise the nation that taxes will not go up, then get into a mess and have to do it anyway.

3.45 pm

That has an immoral effect on the public. It puts people in the position of being lawbreakers by accident because the complications and hoops are such that no sane person can possibly imagine what questions they should ask and what issues they should consider when they enter into the perfectly reasonable activity that is the purchase, passing on or sale of a lease—a simple matter that, since before mediaeval times, people have done in a simple way. It took this Government to make it an act worthy of a senior wrangler from the University of Cambridge: only someone of that quality could read and understand the changes in the Bill and still carry on a business.

One of the sad aspects of this Government is that very few of its members, including the Treasury team, have ever run a business. Nowadays, it is increasingly difficult for those of us who run businesses to be able to say so with pride, but I do. I run a business, and I know how difficult it is to get these things right. The Government are introducing into our business life complications that make people spend more time trying to handle the problems placed upon them by the Chancellor of the Exchequer than trying to win a profit out of a marketplace on which he depends.

We should vote against the schedule and say to the Government: "For goodness' sake get real. Get yourself into the marketplace, understand what you're doing, and don't clog this House up with the unmentionable, the inconceivable, the incomprehensible and the absolutely unnecessary. If you want to tax us, do it publicly, clearly and simply; and admit that your big fault was to promise that you wouldn't increase taxation, then find that you've got to hide the taxes because you dare not face the electorate."

Ruth Kelly

I welcome you to the Chair, Sir Nicholas.

I very much enjoyed the contributions made by right hon. and hon. Members on the Conservative Benches. Let me reassure them that the schedule is framed in the language of the tax law rewrite. That fundamental point has been much examined by Conservative Members, who will be reassured by that comment.

The right hon. Member for Suffolk, Coastal (Mr. Gummer) told me to get real. I would argue that if most people looked at the old stamp duty regime, under which all residential transactions bar hardly any paid full stamp duty, and half of all large commercial transactions paid full stamp duty while half paid none at all, they would realise that that was completely unacceptable. When they realised that the old regime was not compatible with e-conveyancing, they would find that unacceptable, too. When they considered the fact that the old regime had no proper enforcement and penalty powers, they would not think that in line with the principles of modern taxation.

Mr. Prisk

The Financial Secretary talks about the need to modernise and the importance of electronic conveyancing. Can she explain how electronic conveyancing is helped by the requirement to complete tax return forms by hand in black ink?

Ruth Kelly

The hon. Gentleman will know that those forms are available on people's computer screens. Every effort has been made to ensure that they are as user-friendly as possible, but of course the Inland Revenue is continuing to work on making the system as compatible with e-conveyancing as possible.

Mr. Gummer

rose—

Ruth Kelly

The right hon. Gentleman has made so many contributions to this debate already. Perhaps he will let me answer a few more of his questions before he rises again.

The provisions will have absolutely no effect on the vast majority of transactions. In particular, residential purchasers and their advisers will notice virtually no change. Indeed, despite the dire prophecies of Conservative Members, stamp duty land tax was successfully implemented on 1 December 2003. Since then, nearly 500,000 certificates have been issued. Most residential purchasers have seen little difference. By contrast, references to stamp duty land tax in the professional press suggest that the regime has been successful in significantly reducing the avoidance opportunities that were available under stamp duty for commercial transactions. Indeed, in the first quarter of 2004, yield from land transactions was up nearly 20 per cent. on the corresponding period last year, almost certainly because of the reduced scope for avoidance.

Mr. Prisk

I am fascinated by the Minister's statement that residential buyers are not seeing any difference. All the solicitors I have spoken to have talked about the change from a one-page tax form to a 12-page document plus 37 pages of explanatory notes—there are always a lot of explanatory notes with this tax. In what way does that change make no difference to residential buyers? Most of the solicitors told me that they expect to have to charge about another —50 for their time in order to deal with this new tax arrangement.

Ruth Kelly

I am arguing that the purchaser of a property undertaking a residential transaction will probably see no difference whatever. I understand and respect the fact that the hon. Gentleman has many friends in the community of solicitors, who are arguing at every opportunity that completing a form that they are not used to completing is a huge additional burden. I hope that the majority of solicitors will get used to completing it. They do not have to fill in every page, and it should not take them very long. The provisions are not onerous; I have seen them myself and they are entirely reasonable. I am sure that solicitors will adjust to the new form in due course.

The avoidance industry has not been idle, however, and that is partly the reason the provisions in this year's Bill are needed. Clause 282, which introduces the schedule, makes a number of amendments to stamp duty land tax legislation. Although the schedule might appear daunting, I can reassure hon. Members in two respects. First, most of the length of the schedule arises from the fact that it re-enacts in primary legislation regulations that were made last November. We have already debated those regulations at length, and many of the comments made today reflect subjects that have already been debated in the House.

Mr. Gummer

I agree with the Minister about stopping avoidance, but, given that that will mean a great deal more money coming into the Treasury, will she tell me what tax cuts are being made in order for this not to be a tax-increasing measure? That is the issue. The provision will increase the amount of money coming into the Treasury. Where will cuts be made to ensure that this does not represent an increase in taxation?

Ruth Kelly

I can correct the right hon. Gentleman by saying that many of the measures before us today have been suggested to us by practitioners, and they will close tax avoidance routes that were leading to a loss of revenue on which we had already counted, and which we would not have been able to secure if these measures had not been introduced.

Many of the provisions in the schedule are technical, and we have already debated several of them today. I do not intend to run through them all, but I shall deal with the specific point about chain-breaking raised by the hon. Member for Hertford and Stortford (Mr. Prisk). I understand that he has not had the opportunity to table an amendment on the subject. He argues that the conditions on chain-breaking are over-restrictive, but that is certainly not the case. I should perhaps remind hon. Members that we have already extended the relevant period from one year, as set out in the Finance Act 2003, to two years. I certainly think it reasonable that relief should be available only where there is evidence that the property is genuinely the individual's residence, not where, for example, the main use of the property has been to generate income.

Clearly, it is important in that situation to have, for example, restrictions on the time that an individual would need to have occupied the property. If there were no limits, any property dealer could say it was a chain-breaker. We believe that we have completely fulfilled the Chief Secretary's commitment in that regard. For all those reasons, I urge all members of the Committee to support the schedule.

Question put and agreed to.

Schedule 37 agreed to.