Schedule 23 - Corporation tax relief for employee share acquisition

Part of Finance Bill – in a Public Bill Committee at 3:45 pm on 12 June 2003.

Alert me about debates like this

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 3:45, 12 June 2003

Good afternoon, Mr. McWilliam; it is nice to see you back.

If amendment No. 237 is pressed to a vote, I shall ask my hon. Friends to resist it. When the amendment was tabled, I was a little unclear on its purpose in this part of the Bill. The amendment would make a statutory link between the new corporation tax relief and the rules that apply to cross-border transactions between connected companies. The intended purpose of the amendment was not entirely clear, although the hon. Gentleman has spoken to it. It does not appear to change how an employing company obtains relief under schedule 23, but it does seem to result in double taxation, not double relief, in certain cases, which is clearly contrary to the policy intention of schedule 23. I do not think that companies would be enamoured with that prospect.

Perhaps an example would illustrate that problem. A UK employing company might provide workers to its overseas affiliate and charge for that service. To conform to the UK transfer pricing laws, that charge should be at an arm's length rate. The amendment would require the service company to charge any amount calculated by the rules in schedule 23 if relief is available in respect of shares acquired by those employees. That would result in the charge not conforming to the arm's length rate. The other tax authority would be within its rights not to allow the payer a full deduction for that amount, resulting in the same amount being taxed twice.