Finance Bill

On one reading of the draft regulations that we published, those parts of the country that do have gas mains might have been excluded. The indication that I am giving today is that we are minded to allow areas with a gas main to benefit, potentially, from the stamp duty land tax, provided that there is adequate offsetting for the gas burned through renewables provision. Clearly, in areas that do not have a gas main, the issue does not arise. That is one of two areas in which we are seeking to be clearer in regulations in order that we can align code level 6 with stamp duty land tax regulations when we publish them. Of course, over time we will need the flexibility to change the definitions. Because it is a generous tax relief, we need, first, to be sure that the SDLT exemption is working as intended—that is, genuinely incentivising innovation through the early build up of zero-carbon homes on the road to 2016. Secondly, as hon. Members would expect in an area of tax policy, we need to ensure that we take the right steps to tackle any potential tax avoidance. Following consultation, I am therefore committing the Treasury today to conducting an interim review of the SDLT definition of a zero-carbon home halfway through its five-year life for the express purpose of testing the exemption against those two criteria. Furthermore, as I said in Committee, we will carry out before the end of the five-year time limit a full review to assess whether or not we should extend the tax relief, and we will"““give a clear, public signal of our future intentions well in advance””––[Official Report, Finance Public Bill Committee, 15 May 2007; c. 137.]" of the five years. So there will be the review in advance of the five-year end point to see whether, in order to achieve the incentivisation that we seek, we will need to extend the SDLT provision after five years, and there will also be a review after two and a half years to see whether the definitions continue to be aligned, whether we are achieving our objectives, and whether we need to tighten or loosen the definition. By announcing that intention today, we are giving the industry and home owners fair warning that we are setting a high standard which we wish to see new houses reach in return for the tax relief, but that we are willing for the moment to offer flexibility in the definition to kick-start the market, particularly in the areas that I highlighted a moment ago. We need at all times to balance our requirements for a robust tax definition that delivers value for money against the need for an achievable standard in the short and medium term to incentivise the development of the market. We believe that the process that we are setting out today, the consultation in which we are engaged and the affirmative resolution procedure will allow us to do so, and to align code level 6 and our regulations to give clarity and certainty to the market. Having set out our overall strategy, what we are doing to implement it and what additional steps I can announce today as part of the consultation, I shall deal with the amendments to clause 19 proposed by the Opposition. Amendment No. 6 proposes the deletion of subsection (2)(a). The subsection provides that the regulations may"““Refer to a scheme or process established by or for the purposes of an enactment about building””" in relation to the evidence that a building satisfies the definition of a zero-carbon home for the purposes of the relief. The amendment would remove a paragraph which allows the regulations to refer to schemes or processes established for the purposes of another enactment. In particular, it would mean that evidence in the form of a certificate or a letter relating to the zero-carbon home criteria but issued by an assessor accredited for the purposes of the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 could not be adduced as evidence that a house qualifies for relief from stamp duty land tax. The assessors in question—SAP, or standard assessment procedure, energy assessors—are the only class of people who can produce energy performance certificates for newly built homes. They are a different group of energy assessors from the domestic energy assessors who are being trained to produce energy performance certificates for inclusion in home information packs. The new home assessors have been up and running for some time. If we did not allow taxpayers to adduce such evidence, we would lose much of the evidence base that would be used to evaluate whether a home was zero carbon or not. That is particularly important because the decision on stamp duty is made at the moment of purchase, whereas we are trying to incentivise homes to be zero carbon throughout their lifetime. If we could not use the evidence produced by those assessors, we would have to use other, perhaps less reliable, forms of evidence to evaluate a home’s entitlement to the relief. If HMRC had to develop a new accreditation system, that would be tantamount to reinventing the wheel. Such an approach makes no sense. It would mean increased costs for builders as they would face more regulatory burdens to build zero-carbon homes, because they would face one set of mandatory tests for the purposes of the energy performance of buildings regulations and another to satisfy HM Revenue and Customs that the relief is justified. In designing the relief we have tried to build on existing structures, and I do not see how the amendment would help. We are trying to encourage the building of zero-carbon homes by developers, not to make them go though additional tests. When developing proposals for the relief, we thought that builders should be able to draw on the use of existing material from other legislation to adduce the home’s entitlement to the relief from stamp duty land tax. Energy performance certificates were initiated in January 2003 and it will be mandatory for an EPC to be issued when a new building, including a new home, is built, sold or rented out. The criteria for zero-carbon homes draw on the same methods of establishing energy performance of buildings as used for EPCs, although the criteria for zero-carbon homes goes beyond the assessment required for EPCs. The advantage of using the energy performance certificate system is that it already exists as a framework to assess the energy performance of buildings. To set up another system to deliver similar objectives and assess deliberately similar tests would be inefficient. Amendment No. 7 would insert two new paragraphs in the clause. The first new paragraph adds a requirement that the regulations made shall expire one year after coming into force. Further regulations permitting the relief would have to be laid. The second new paragraph—paragraph (9)—states:"““Further regulations under section 58B may not be made unless they contain a provision specifying that they expire one year after coming into force.””" The amendment would limit the lifetime of any such set of regulations to just one year after their coming into force, after which either the relief would not be available or new regulations would need to be made annually affording the relief. As a consequence, parliamentary and Government time would have to be deployed every year in renewing the regulations on annual basis between now and 2012. Obviously, like most hon. Members, I recognise that the regulations that underpin this relief will change over time. That is inevitable as the zero-carbon homes industry is in its infancy and technological developments make change inevitable. We have made allowances in the clause to amend the regulations where such technical changes are needed. Indeed, I have today announced a two-and-a-half-year review to ensure that we are achieving our objectives of alignment and progress towards our goal. There is a considerable difference between having the flexibility to make changes to regulation if required and what is being proposed in amendment No. 7, which is essentially that, every year, the relief should be allowed to run only on a year-by-year basis, depending on renewal by the House. Our fear is that that would send a negative signal. Imposing a one-year time limit and having to renew the regulations each year would not provide developers with the certainty that they need in order to plan the development of zero-carbon homes. Given the length of time needed from land acquisition to sale of new homes, such an amendment could restrict house builders’ opportunity to take full advantage of the tax exemption. In our view, the amendment would create uncertainty for homebuyers and also home builders, and significantly reduce their ability to plan ahead financially with a view to building a zero-carbon home.