Schedule 1
Finance (No. 2) Bill
11:30 am
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
The amendments concern the specific way in which the Government have chosen to implement the ECJ judgment, and I want to talk about something that the Financial Secretary highlighted in the clause stand part debate. He referred to a statement made by his right hon. Friend the Paymaster General in February, about the Government trying to close down any attempts made by UK companies to use the Marks & Spencer judgment to claim group relief and to enter into what was described as relevant arrangements to enable group relief to be claimed.
I should like to probe the arguments of the Financial Secretary about the clauses that concern those arrangements. It is fair to say that if someone were setting up a UK-based group of companies, they would seek to ensure that the shareholdings were such that they were able to claim group relief if losses were incurred in trading operations. They would check that they could offset the losses in one company against the profits in another for tax purposes. I would argue that that is a legitimate form of tax planning from the outset. Following the Marks & Spencer case, my belief would be that a UK parent company setting up subsidiaries overseas would, when starting up a new operation or new business, seek to structure the shareholdings so that they qualified for group relief. It may be that rather than encouraging an overseas investor to buy 30 per cent. of a subsidiary, they might ask that investor to buy just 24 per cent., so that they could qualify for group relief, and set up such arrangements from the outset. That is a perfectly reasonable form of tax planning.
However, there may be circumstances in which other arrangements are put in place, which would enable businesses to claim group relief on losses incurred by overseas subsidiaries. I should like to run through a few examples, to try to tease out from the Minister where he thinks the boundary lies between what he thinks is a sensible arrangement as part of the normal structure of a group and arrangements that might, in his view and that of the Treasury, be deemed to be tax avoidance. When companies are looking at structuring their businesses overseas, they need some certainties and some clarity.