Clause 38 - Charges on income for the purposes of corporation tax
Finance Bill
4:30 pm
Philip Hammond (Shadow Chief Secretary To the Treasury, Treasury; Runnymede and Weybridge, Conservative)
Clause 38 amends existing legislation so that annuities and annual payments are deductible as trading deductions or as expenses of management, rather than as charges on income, which is a concept that the Government are seeking to phase out. The change that the clause effects leaves qualifying donations to charity as the only remaining charges on income. Therefore, it seems that the days of charges on income are numbered.
The explanatory note is confusing. It paints the clause as simply a tidying-up exercise, but reference is made to avoidance schemes using charges on income as a tax avoidance loophole. Those payments will now be subject in non-trading companies to having a main purpose that is not tax avoidance.
We have no problem with what the Government are doing here, but if this is an anti-avoidance measure that has revenue implications, that is rather more than a tidying-up exercise. Can the Paymaster General confirm that this is an anti-avoidance measure, rather than simply a tidying-up move in the direction of fulfilling the Government’s general desire to remove charges on income from the tax system? After she has done that, can she say how much revenue will be involved?