George Young (North West Hampshire, Conservative)

I just wanted to press the Paymaster General on what appears in schedule 7 regarding conditions A and B.

The schedule deals with the transfer of assets abroad. I have no time for those who transfer their assets abroad with a view to avoiding tax and I welcome the initiatives that the Government are taking in the Bill to stop that practice. However, there are legitimate reasons why assets might be transferred abroad—the establishment of a business, for example. The bit that caught my eye is in paragraph 3, where we come across conditions A and B. The provision is referred to in the explanatory notes as a revised purpose test, designed to discover the motive behind the transaction. I would be grateful if the Paymaster General would let me know whether the conditions appear in other tests of tax avoidance.

As I understand it, if there is a dispute between the Revenue and an individual as to whether a certain activity is taxable, it goes before the courts at the end of the day, and they would consider all the circumstances of the case and come down on one side or the other. If one goes down the condition A and condition B route, the taxpayer would not just have to show that, on balance, his interpretation was correct, but that the interpretation the Inland Revenue had put on it was unreasonable. It would be interesting if the Revenue planned to introduce this test in schedule 7, but extended it broadly to apply to other cases in which there was a dispute between the individual and the Revenue. If it did, the terms of trade between the Revenue and the individual would be tilted towards the Revenue.

I have some questions for the Paymaster General when she winds up the debate. Is there any precedent for the conditions; why do not they apply, as I understand they do not, in other tests of tax avoidance; and are they the beginning of a series of new tests designed to shift the balance away from the individual and towards the Revenue?

See this speech in context