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Finance (No. 4) Bill

I worry that too much of this tinkering will be counter-productive in any event and that the tapering of the child benefit system will be hugely expensive. Many people do not know whether they will earn between £50,000 and £60,000. They might work on a consultancy basis or spend a few months a year unemployed or travelling. Trying to unravel all that will be incredibly difficult. I wish to make a few provisional passing comments on clauses 211 to 213 and 224 relating to the Chancellor's decision to impose a 15% stamp duty land tax on acquisitions of £2 million and residential properties by non-natural persons—in other words, companies. Although I support the essence of the proposal, it might have the unintended consequence of stalling development, particularly in central London. I appreciate that high-end property developers might not necessarily be seen as deserving of particular Government acknowledgement, but there is no doubt that the property development industry in and around central London generates significant tax revenues and creates jobs. Not only are the profits taxable here but significant amounts of irrecoverable VAT are often incurred on redevelopment projects. Developers will generate SDLT revenue by buying and reselling redeveloped properties. In the Budget press release, it was noted that the 15% SDLT charge would not apply to developers because they tended to use companies for limited liability rather than tax avoidance reasons, but when the draft legislation was published, the relief for developers was limited to bona fide developers who had been carrying on a residential property development business for at least two years. The two-year requirement may seem eminently sensible as a means of ensuring that short-life development companies are not established by individuals who ultimately wish simply to use the property in question. Nevertheless, I fear that the qualifying period will discriminate against new property development businesses, which cannot show the requisite track record. Indeed, all new entrants into the market are likely to be priced out because their acquisition costs have suddenly become 8% higher than those of their competitors. We therefore risk creating an uneven market—indeed, a market against newcomers. The 15% charge is also likely to be an issue for experienced developers. The scarcity of bank finance for development properties at the moment means that much of the finance for high-end residential property development is coming from equity investors, who are bridging the significant funding gap that now exists. The requirements of equity investors will often mean that stand-alone special purpose vehicles are established for individual projects, so once again, the statutory test will not be met. If HMRC wants to consider an alternative policing arrangement and seeks to avoid creating a dual market, it might consider imposing a second charge—either another 7% or the balance of the 15%—if the property is used before being sold on by a developer with SDLT. Alternatively, there could be a time-based charge, so that if the property has not been sold after, say, three years, the second charge comes into play. It is perhaps understandable that this afternoon I have dwelt on some of my concerns about the Bill. Nevertheless, I appreciate the acutely troubled state of the public finances. The Chief Secretary was absolutely right when he said that it was important that we should not pass on the costs of this generation's excessive consumption to our children and grandchildren. I therefore reiterate my support for the deficit reduction plan that the coalition set out almost two years ago. I trust that the Bill will progress swiftly and smoothly to the statute book.