Schedule 7 - Accounting practice and related matters
Finance Bill
5:00 pm
Susan Kramer (Shadow Minister, Treasury; Richmond Park, Liberal Democrat)
I shall speak briefly to the cluster of amendments and more specifically to amendment No. 69.
The hon. Member for Runnymede and Weybridge is apparently reliant on an intent test for the purposes that he wishes to achieve. We regard that as permanent employment for lawyers, and as we do not have a lawyer in our collection, we would rather find other ways to deal with the problems in the schedule.
As the hon. Gentleman made clear, paragraph 1 tackles rent factoring, the process by which the right to receive a stream of rentals for a period is sold in exchange for a lump sum. From the perspective of the Inland Revenue, as it was called at the time of the John Lewis case—it is now HM Revenue and Customs—it looks like a tax avoidance measure, an attempt to convert what would have been an income stream to a capital gain to be offset against capital losses.
I come to the clause with a background not as a tax accountant or a tax lawyer but as a banker who worked for many years in structured finance, though more in the United States than in Europe and not particularly in the UK. As a consequence, I am conscious that one of the breakthroughs in terms of expanding liquidity in the financial markets and options for businesses and Government to finance a range of transactions, was to achieve the goal of taking what had not been recognised as an asset—the right to receive a future income stream—and to recognise it as an asset and treat it as such.
The interesting part of the John Lewis case—I read the judgment from the Court of Appeal—was a recognition of the conversion of that perspective on a future rental stream, to see it as a right, or as attached to a right, which could be securitised and treated as any other asset. I gather from lawyers that the tree rather than the fruit of the tree is the ultimate test.