Schedule 6 - Accounting practice and related matters
Finance Bill
12:15 pm
Philip Hammond (Shadow Chief Secretary To the Treasury, Treasury; Runnymede and Weybridge, Conservative)
I beg to move amendment No. 113, in schedule 6, page 86, line 24, at end insert—
‘Spreading of adjustment on change of accounting policy 6A(1)In paragraph 19A of Schedule 9 to FA 1996 (loan relationships: adjustment on change of accounting policy), after sub-paragraph (5) insert— “(5A)Where there is a change of accounting policy in accordance with sub-paragraph (2)(a) above, then the company may in respect of its cumulative adjustments, elect that the adjustment shall be spread over six periods of account rather than being taxed in accordance with sub-paragraph (3) above. (5B)An election made in accordance with sub-paragraph (5A) must be made— (a)by notice in writing,
6A(1)In paragraph 19A of Schedule 9 to FA 1996 (loan relationships: adjustment on change of accounting policy), after sub-paragraph (5) insert—
“(5A)Where there is a change of accounting policy in accordance with sub-paragraph (2)(a) above, then the company may in respect of its cumulative adjustments, elect that the adjustment shall be spread over six periods of account rather than being taxed in accordance with sub-paragraph (3) above.
(5B)An election made in accordance with sub-paragraph (5A) must be made—
(a)by notice in writing,
(b)to the Commissioners,
(c)within twelve months of the end of the first accounting period to which the new basis applies.
(5C)If an election is made, then, in each of the six periods of account beginning with the first period for which the company prepares accounts in accordance with international accounting standards, an amount equal to one-sixth of the amount of adjustment is treated as arising and chargeable to tax.”.’.
The amendment is a pragmatic measure that deals with two issues. When other major changes have been made in the basic computation of taxable profits—for example, the change from realisation basis to market in 2002, and the introduction of the loan relationship rules in 1996—facilities were made available so that the gain or loss arising from the introduction of the legislation and the change that was therefore taking place could be spread over six years in order to ensure that taxpayers were not hit in a single period with what was effectively a windfall tax. Also, the legislation and the statutory instruments are still being laid around the whole subject of the implementation of IFRS and its impact on taxable profit calculations. As the Paymaster General said, and the hon. Member for Wolverhampton, South-West emphasised, there is an ongoing consultation process on how the detail of that would work.
It is unreasonable to expect taxpayers to have to pay any windfall tax arising from the introduction to the Revenue in a single period. One concern is that the rather generous, or reasonable, treatment that has been offered when there have been earlier structural changes to the way in which taxation is calculated appears not to be on offer this time. Perhaps we on the Conservative Benches are puzzling over the Red Book prediction that corporation tax receipts will rise by 28 per cent. next year, compared to this year. Many who are engaged in business and industry spend some time puzzling over that, too. Perhaps the Government expect that there will be a one-off windfall benefit from these changes that it is seeking to capture, which is why they have not allowed a more generous spreading treatment for the one-off change that has been allowed in the past.