My hon. Friend raises a very important point. I have not specifically considered it, but it fits well with some of the additional concerns put to me, which I am now putting to the Minister, about defining who should qualify for the relief and how it should be assessed by HMRC. It would be interesting to hear whether consideration has been given to using the expertise of outside bodies to ensure that HMRC gets its assessments right first time in administering this tax relief.
In the light of the National Audit Office’s recent report that HMRC monitors just 10% of its “tax expenditures”—there are more than 1,000—it would be reassuring if the Government committed themselves to
reviewing the operation and take-up of this tax relief each year to ensure that HMRC is fully aware of how it is being used, and, more important, whether it is being abused.
4.45 pm
My second query relates to the interaction of not-for-profit productions, which are often registered as charities, and this tax relief. In its press release on the publication of the consultation document in March, Arts Council England pointed out that the majority of theatre productions which receive funds from it are registered as charities, not companies, and are therefore not liable for corporation tax. It seems that such concerns were also raised throughout the consultation, with many wondering how the numerous not-for-profit productions to which this tax relief would be hugely valuable would still be able to benefit. The press release suggested that such registered charities would have to set up a trading subsidiary in order to benefit from the tax relief.
The Government’s response to the consultation, which I believe was published last week, noted those concerns and suggested that the Government had worked closely with stakeholders to ensure that such charities could benefit without incurring significant additional administrative costs. However, it remains unclear whether Arts Council England’s suggestion about the setting up of trading subsidiaries is the Government’s favoured approach. The document merely states that HMRC intends to publish “comprehensive guidance”. Clearly, in the light of recent reports from the Public Accounts Committee and the National Audit Office, the right balance must be struck between making this welcome relief available to those at whom it is aimed, and ensuring that such well-intentioned reliefs are not open to widespread abuse. I hope that the Minister will be able to provide some clarity and reassurance.
Let me now say something about the definition of “touring productions” for the purposes of a payable tax credit. As the Minister helpfully explained, two levels of tax credit are available to touring productions that surrender their losses—if they have losses, of course—in order to give further incentives to the bringing of productions to areas that are, as the response puts it, “under utilised”. If a production does tour, an enhanced rate of tax credit is available, amounting to 25% of losses surrendered. For all other productions—those that do not tour—the payable tax credit is 20%.
The Government’s consultation response indicates that they have changed the definition of “touring production” following suggestions that many smaller productions do not present as many as 14 performances in a single venue, or perform the same show in 12 different venues, which were the previous criteria. The Government have now decided that productions are defined as “touring” if they meet one of two criteria: they must either perform in at least six separate premises or present at least 14 performances in at least two different premises.
It is the second criterion that has caused concern, because it remains unchanged even following the consultation. I should be interested to hear the Minister’s justification for that. The Government have clearly responded to concern about the number of different venues on a tour, but perhaps he can explain the thinking behind the classing of a production as being “on tour” if it performs in just two different venues. Even if it puts
on a number of shows at those two venues, I wonder if that really could be classed as a tour. What is to prevent a production from moving from one side of the road to the other, for example, in order to benefit from an enhanced tax credit?
Concerns have also been raised by the National Centre for Circus Arts, which is worried about the definition of “theatre”. Although the word “circus” is specifically mentioned, the centre thinks that the definition is still too narrow to reflect the nature of many contemporary performances, not least those in circuses. It would welcome confirmation that all circus performances will qualify for the tax relief. It feels that the new clause refers to a dramatic production in which
“the performers are to give their performances wholly or mainly through the playing of roles”.
That wording could exclude a great many excellent shows which the centre feels that the Minister would want to encourage and which, in the nature of circus, showcase superb skills of dexterity and athleticism, but may not involve a narrative or character acting as we might understand it to be, in the context of a traditional play. Is the Minister prepared to provide some clarity and reassurance, or alternatively to meet the National Centre for Circus Arts to discuss how HMRC can best evolve the guidance that is supposed to flow from this Bill, and which people are still awaiting, to ensure that as wide a range of circuses that do not involve the use of wild animals are eligible for the relief? As has been said, circus originated in this country, and this new tax relief could help it grow internationally also.
As the Labour party introduced this tax relief for the creative industry, we fully support another tax relief of a similar nature. However, there has been only a short time to reflect on the issue, and there are some outstanding queries, on which I hope the Minister will be able to give some reassurance.
New clause 6 is on the exclusion of incentivised electricity and heat generation activities. It removes more renewables activities from being eligible for the enterprise investment scheme—although it still allows anaerobic digestion and hydro-power remain to be covered—unless carried out by a community company. This was announced a little while ago. It is worth reiterating some of the points we made on clause 53. We have a particular concern regarding the impact on investment in the renewable energy sector. New section 257MS explicitly rules out enterprises that benefit from Government renewables subsidies, including feed-in tariffs, renewable obligation certificates and the heat incentive scheme. Given the well-publicised need for alternative sources of energy, it seems very strange that the Government are content to disincentivise this activity, because it could result in a big slow down in investment in the renewable energy sector in Britain, and potentially jeopardise our chances of meeting European renewable energy targets and climate change targets. It could also limit the ability of communities to invest in localised renewable energy schemes.
In addition, funds already invested in renewable energy projects may have to be returned. It has been estimated that, for anaerobic digestion alone, the sum is over £130 million. Considerable anxiety has been expressed over the past four years about this Government’s slightly erratic approach to renewable energy and renewable energy generation, so it would be helpful if the Minister could provide some reassurance in that regard.