Clause 38 - Expenses of management:
Finance Bill
5:15 pm
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
The TUC—that was a Freudian slip. The CBI has made representations on management expenses.
To make the deletion requested by the hon. Gentleman would double the costs to the Exchequer of introducing the change. It is more appropriate to deal with the matter in the review that I have explained to him, so that we can see the system developing in the round.
The CBI's comments yesterday were submitted to each member of the Committee, and I am delighted that the CBI welcomes the extension of tax relief for the expenses of management investment, because it will benefit companies. It is new, and the Government are giving up tax revenue to provide that support to companies. As the CBI recognises, that removes a barrier that has created difficulties for holding companies that manage their subsidiaries and have their own trading activities.
The hon. Gentleman, referring to the CBI, said that it thought that the disallowance of capital expenditure was unnecessary and inappropriate because trading and investment businesses have different features. We cannot accept that there is a relevant difference; traders and investors will buy capital assets that yield income. Why? They are retained by the business. Traders will buy premises and machines, and investors will buy shares that yield dividends in properties from rents. It is right to make it clear in legislation that the rules for trading expenses and expenses for management investments are aligned.
On intervention, the hon. Gentleman said that the CBI thought that a nothing would arise from the new tax. In fact, the changes being made will remove the tax nothing and the potential for expenses of management investment to be denied relief because they are incurred by a company that does not qualify as an investment company. Although I understand that the CBI would like more, the proposals are very generous towards management expenses, and I ask the Committee to reject the hon. Gentleman's amendment should he press it to a Division.