Schedule 8 - Loan relationships: miscellaneous amendments
Finance Bill
9:45 am
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
As I tried to explain, the rules that were set in 2002 were widely welcomed and are working well. Discussions with the venture capital trust industry are continuing and a number of issues are being raised. The role of the general partner is at the heart of a number of issues in the tax system. It is one thing to identify an issue for a particular industry. However, I have to ensure that we do not allow a particular industry or sector to operate in a way that we did not allow anywhere else, for good reason, under the Taxes Act and other legislation. Amending the control tests, even narrowly as suggested in amendments Nos. 53 and 54, is not appropriate, because it would risk weakening existing legislation that applies elsewhere.
It is not within the gift of Government—we would be challenged—to say that a particular industry could work in one way but that everyone else could not. I have to pay attention to the general rules. The hon. Gentleman will understand that a relaxation of the control test in one part of the system will cause significant problems across the board. I think that he is well aware that dialogue between the Inland Revenue and the venture capital trust industry continues. It has raised the matter with us, but what he suggests is not appropriate and cannot be done. He asks how else I would do it. Frankly, I cannot give him an answer. The fundamental point is what happens elsewhere in the tax system.
I turn to amendment No. 55, on which I might be a little more helpful, although I do not want to raise the hon. Gentleman's hopes—I am not going to accept it; I thought it best to give that caveat, just in case. It seeks to extend the application of the new definition of a collective investment scheme limited partnership to areas of legislation beyond the application of the late interest rules.
As I said earlier, when outlining the provisions of schedule 8, the Government propose a change that puts beyond doubt the circumstances in which the late interest rules are set aside when a limited partnership venture capital fund has invested in a close company. We consider that the changes go far enough to address difficult definitional areas, and they are welcomed by the industry.
To the extent that there remain areas of difficulty, the Revenue will continue discussions with the British Venture Capital Association , with a view to resolving the difficulties through revised guidance. I confirm that the existing clarification in Revenue guidance will not be withdrawn. Concern was expressed by the industry that that guidance would be withdrawn as a consequence of schedule 8, but it will not be.
I hope that the hon. Gentleman agrees that we are doing our best to respond to the particular issues raised by the industry, but we clearly have to draw a line. We are not going to allow, nor should we, the breach of other legislation. I hope, at least for now, that the hon. Gentleman considers the matter to have
had a good airing and that he will withdraw the amendment. If he presses it to a Division, I shall ask the Committee to reject it.