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Finance (No. 2) Bill

I am not sure, Mr. Speaker, which part of the word ““no”” the right hon. Gentleman is struggling with. Many hon. Members, including the hon. Members for Chipping Barnet and for Gosport (Peter Viggers), my right hon. Friend the Member for West Dunbartonshire and my hon. Friend the Member for Wolverhampton, South-West, referred to trusts, in particular two types of trust—the accumulation and maintenance trust and the interest in possession trust. There is no clear rationale for privileging those trusts. It has been clear for some time that wealthy individuals are using trusts primarily to shelter their wealth from inheritance tax. The Government believe that it is unfair for people to gain such an advantage, and we have therefore taken action to ensure that inheritance tax exemptions apply only when trusts are set up to cater for certain prescribed circumstances. Those are, broadly, when they provide for bereaved minors, for the disabled, or for only one beneficiary. In other cases, the normal charges for trusts will apply, preventing them from being used as shelters. There has been a great deal of speculation in the media that this measure will affect millions of people. Much of that speculation is groundless and has raised people’s fears unnecessarily. For the avoidance of doubt, however, and in response to several issues raised this evening, I want to confirm a number of points about trusts. Life assurance policies that were placed in trust before 22 March 2006 will continue to be regarded as being in pre-Budget trusts. My hon. Friend the Member for Wolverhampton, South-West asked two specific questions. First, he asked whether discretionary trusts still have a 10-year anniversary charge. The answer is that existing tax regimes for discretionary trusts remain, including the 10-year provision. His second question related to wills, for example, in relation to an individual who has Alzheimer’s. Wills can still be changed up to two years after death by using a deed of variation, which still applies in that case. When someone dies without having made a will, their bereaved spouse or civil partner will continue to get the spouse relief. Spouse relief will continue to be due when an ““interest in possession”” trust is set up under a will giving a life interest to a bereaved spouse or civil partner, where someone takes the asset outright. The hon. Member for Gosport referred to the use of trusts at the age of 18 or 25. Using trusts beyond the age of 18 will still be possible—the Government are just bringing those into the mainstream tax rules at 18. All the organisations quoted, including the Legal and General, say that the tax charge is not enough to stop people setting up a life insurance policy. The Government therefore reject statements that the provision might affect millions of people. We recognise how important trusts are, but we believe that the tax system should not apply artificial incentives for setting them up. Many Members referred to the home computer initiative and to clause 61, which removes the tax exemption. With effect from 6 April, a tax charge will arise on computer equipment made available by employers to their employees for private use. It will not, however, change the position for an employee who has been provided with computer equipment solely for business purposes and where private use is not significant. The hon. Member for South-West Hertfordshire (Mr. Gauke) raised specific points relating to European Court of Justice rulings. In addition to what I have already said, I reassure him that we will continue to defend UK tax law against challenges before the ECJ. We will keep the tax regime under review. There are good grounds to defend UK tax law consistent with our objectives. We have every reason to believe that we will continue to be able to do that. My hon. Friend the Member for Northampton, North (Ms Keeble) asked a series of questions with regard to charities. She sought an assurance with regard to specific clauses. I reassure her that the three measures to defend charitable reliefs against misuse do precisely that—the rules are targeted on areas of misuse, and charities using the reliefs correctly will not be affected. To give her further reassurance, the Charity Finance Directors Group has said that it believes that it is essential that the charity brand is protected and not tainted by association with tax avoidance schemes. The Charities Tax Reform Group strongly welcomed the introduction of measures to prevent the exploitation of tax reliefs for charities by donors of large amounts, to their benefit. [Interruption.] [Hon. Members: ““Give way.””] I can tell by the noise in the Chamber, as I am sure that you can, Mr. Speaker, how riveted Members are by discussion of the Finance Bill. I therefore look forward to seeing them all in Committee.