Schedule 16 - Community investment tax rlief
Finance Bill
10:15 am
Mr Howard Flight (Arundel and South Downs, Conservative)
I want to refer to issues arising in schedules 16 and 17 and to point out to the Government some of the concerns raised, mainly by the Law Society. The relief is more of a subsidy than a tax relief and delivering such through the tax system will create complexity for both the Revenue and investors, particularly when the Revenue might not otherwise normally be involved in the provision of such direct grants.
Loan amounts can be repaid over a period and if they are repaid early or transferred relief will be withdrawn. In those circumstances the withdrawal of relief appears to take place from the year before the year in which the event giving rise to the withdrawal occurs and paragraph 42 of the explanatory notes to schedule 16 gives an example. That seems a little unjustified. The withdrawal of relief takes the form of an assessment under schedule D, case VI, for the tax year or accounting period for which the relief was obtained. If the withdrawal relates to the tax year or accounting period for which it was obtained, could not the tax liability for that year simply be reinstated because that might allow other reliefs to be used against that tax liability? An assessment under schedule D, case VI, is less flexible in that context.
Follow-on loans do not in many circumstances achieve tax relief, presumably because there is a danger than if a loan is made to a CDFI a subsequent loan can be made and the sums subsequently lent used to repay the earlier loan. However, the CDFI might need a further loan and the second loan might be far greater
than the original loan. Could that not be dealt with differently by allowing a subsequent loan to gain relief if the former loan is repaid out of profits or available funds of the CDFI? There is a cap on the total loan relief available to a CDFI.
Finally, provisions are included that prevent a CDFI being reconstructed without a disposal of the shares, securities and loans held in that CDFI. Why has that provision been included?