Clause 26 - Receipts cases
Finance Bill
4:30 pm
Philip Hammond (Shadow Chief Secretary To the Treasury, Treasury; Runnymede and Weybridge, Conservative)
I shall deal with the group of amendments in three separate sub-groups, because they deal with three separate things.
Amendments Nos. 36, 37 and 45 seek to insert into clause 26 a motive test similar to the one that is already evident in clause 24. It is the same test, but a UK tax advantage is gained that is not minimal. I know that the Revenue's suggestion in the explanatory notes is that that is unnecessary, because there will always be a tax advantage motive in receipts cases. Even if that were true, however, the Revenue could know that only by examining existing disclosed cases.
The suggestion is that the amendment would give the taxpayer another layer of protection, even if the motive test were satisfied in every case, but it would also futureproof the legislation. The Paymaster General told us today about terrible things that have been disclosed under the Finance Act 2004, which evidently were not known to the authorities before because the Revenue has had to rush to legislate to deal with them. It is rather drastic to say that everything that falls within the scope of clause 26 will necessarily always have a main purpose of gaining a UK tax advantage.
I therefore urge the Paymaster General both to futureproof the legislation and to avoid preventing newly developed structures that do not have a principal purpose of gaining a UK tax advantage from being caught by the legislation. I do not know what those structures might be, but we have a very innovative financial community, and it would be a brave person who said that, because this is an empty set at the moment, it will always remain empty.
Amendments Nos. 38 and 43 seek to prevent double counting and ensure an appropriate priority of application of the legislation, by providing that the rules do not apply where the receipt side of the transaction is already taxed as capital gain or under CFC—controlled foreign company—legislation. That would be done by inserting new subsection (9)(d), defining an additional class of non-qualifying payments.
Amendment No. 44 is a probing amendment and substitutes ''UK tax advantage'' for ''benefit'' in subsection (10), which is consistent with what we seek in amendments Nos. 36, 37 and 45. Can the Minister confirm what we are to understand by ''benefit'' in subsection (10), if it does not refer to UK tax advantage?
Amendments Nos. 39 and 42 seek to counter the requirement that to be outside the rules a receipt must be taxed in the year of deduction. There might be reasons why the taxation of a receipt takes place, for example, the following year. Unless the Paymaster General has a precise reason why, in order to prevent further avoidance, a rule should specify that the receipt must be taxed in the year of deduction, we propose a provision that allows the period to be extended by up to two years after the year of the assessment of the deduction. The important thing is that there should be a corresponding taxable receipt. Whether it comes in the same year or the following year is less important.
The Government amendments seem unexceptionable and even slightly beneficial in that, if I interpret them correctly, they narrow slightly the scope of the provisions.