Clause 25 - Rules relating to deductions
Finance Bill
4:00 pm
Philip Hammond (Shadow Chief Secretary To the Treasury, Treasury; Runnymede and Weybridge, Conservative)
I shall address the amendments in two sub-groups and then make passing comments on the Government's amendments, which the Minister will no doubt explain in greater detail.
On amendments Nos. 32, 33, 34 and 35, as the Bill is drafted, the taxpayer has two options on receipt of a notice. Either he can disclaim part or all of the deduction that he is claiming, or he can apply the rules in clause 25 to his self-assessment, which would mean the disallowance of the whole of the interest deduction to the extent that a deduction had been made. We are arguing that the taxpayer who chooses not to disclaim should not be penalised, but should be required to make a proportionate reduction of the claimed allowance or deduction as he would if he disclaimed, so that he is placed in the same position as he would have been had he disclaimed part or all of the allowance.
We suggest that equity requires that the amount disallowed under subsection (3) should be the amount attributable purely to the UK tax advantage delivered as a result of the qualifying scheme and nothing more. I hope that the Minister accepts that principle. No doubt she will have something to say about the amendment itself, but if she can accept the principle, and explain, if she does not think that the amendment is necessary, why not, that would be helpful.
Amendment No. 35 seeks to omit subsections (4) and (5), because they raise the possibility of an amount being treated as deducted or otherwise allowed, where it is not actually so allowed, as a result of the operation of a rule similar to that used in an overseas jurisdiction. That could give rise to a double hit on the taxpayer if he is deemed to be operating a double deduction and the amount in question in the overseas jurisdiction is not allowed to be deducted. I can see no reason why, if the deduction in an overseas jurisdiction is not allowed, the requirements for falling within the scope of this legislation should not be deemed to have failed. Again, an equitable interpretation would be that if the taxpayer, for any reason, does not get the double deduction, he should not be penalised. If I have missed something here, no doubt the Minister will tell me in due course.
Government amendments Nos. 70 to 72 look, on the face of it, to be harmless tidying-up exercises. We are slightly more interested in Government amendment No. 73, which seems to make a substantive change. It turns the subsection in question from providing a limiting definition of reduction of liability to adding circumstances of liability. That is a rather big turnaround in what it is intended to do. I shall wait to hear what the Minister says about the Government amendments and then question her further on them.