Schedule 10 - Chargeable gains:
Finance Bill
12:45 pm
Mr Howard Flight (Arundel and South Downs, Conservative)
I beg to move amendment No. 30, in page 179, line 30, at end insert—
'Conditions for shares to qualify as business assets
1A (1) Paragraph 4 (conditions for shares to qualify as business assets) is amended as follows.
(2) In sub-paragraph (2) for ''if at that time'' substitute ''if at the time it was acquired''.
(3) In sub-paragraph (3) for ''if at that time'' substitute ''if at the time it was acquired''.
(4) In sub-paragraph (4) for ''if at that time'' substitute ''if at the time it was acquired''.'.
This is the amendment to which I referred during the stand part debate on clause 45. It is designed to deal with what we still consider to be a potential unfairness in the treatment of people who work for a business, people who have been made redundant and people who have retired. As the Minister pointed out, if the holder of the shares leaves the qualifying appointment, the shares become non-business assets. On a later sale, the proceeds are divided into business and non-business gains and taxed at different rates. It is quite a complicated calculation. A person who sells while employed could easily pay a lower level of capital gains tax than a person who held the shares for a longer period and sold them in retirement.
The Economic Secretary's justification did not entirely stand up. I refer to an earlier debate, in which the Government seemed to have no qualms about imposing a tax rate that is now 52 per cent. on the main options, which are designed to encourage people to work hard and to make a success of business. The Government speak with a forked tongue about
motivating employees in smaller and medium businesses.
The amendment seeks to clarify the position by freezing the status of the shares by reference to whether the person was an employee or a trustee acting on behalf of an employee at the time the shares were acquired. It would not apply to someone who had inherited the shares, who is clearly in a different position. Nor would it apply to non-share assets, because qualification relates to use in a business. The Chartered Institute of Taxation has suggested that paragraph 4 is deemed to have had effect from 6 April 1998, which would deal with the problems.