Clause 77 - De-grouping charge: transitional relief
Finance Bill
10:00 am
Mr Howard Flight (Arundel and South Downs, Conservative)
The clause covers fairly complex territory and its provisions are, in the main, welcome. I have had some difficulty in understanding the technical note about subsection (6). What are the circumstances in which a section 179 charge will arise when a company holding a previously transferred asset leaves a worldwide group less than six years after the transfer of the asset within an old UK-only capital gains tax group?
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
The clause clarifies the transitional rules—[Interruption.]
Dr Michael Clark (Rayleigh, Conservative)
Order. I do not mind conversations in Committee, but if hon. Members wish to speak they should move closer to each other rather than shouting across the Benches.
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
The clause clarifies the transitional rules for the de-grouping charges, including those in the Finance Act 2000. The clause is designed to ensure that there will be no de-grouping charge where, after 1 April 2000, a company holding an asset previously acquired from another member within the group prior to 2001 is transferred out of the old group but remains within the worldwide group. The de-grouping rules apply where a company leaves a group holding an asset previously acquired from another group member in the previous six years.
The transitional rules will ensure that in such circumstances, an asset transferred outside the UK group after 1 April 2000 would not trigger a de-grouping charge, provided that the asset remained within the worldwide group. The Inland Revenue subsequently received representations that on one reading of the legislation—hence the changes—a de-grouping charge would be unintentionally triggered in certain circumstances. The modernisation of the group chargeable gains rules was welcomed last year and the clause will ensure that no de-grouping charge will be triggered in the circumstances that I have described. It has been widely welcomed.
I think that I have covered the issue of de-grouping. If not, the hon. Gentleman might like to make his point again. He seeks the assurance, which I can give him, that the clause tidies up the issue that we promised to tidy up.
Mr Howard Flight (Arundel and South Downs, Conservative)
I thank the Paymaster General for that due tidying up.
Question put and agreed to.
Clause 77 ordered to stand part of the Bill.