Ivan Lewis (Economic Secretary, HM Treasury; Bury South, Labour)

I am wondering whether those As, Bs and Cs were the same ones that I was referring to earlier. I am not quite sure, but I will do my best to respond in detail to the hon. Gentleman's reasonable points.

It would be useful if I started by explaining why we feel there is a need for these measures. Stamp duty land tax was introduced in 2003. One of the main drivers was to provide fairness between taxpayers. Residential purchasers and small businesses have never had any choice over whether to pay stamp duty. By contrast, stamp duty was effectively a voluntary tax for many commercial purchasers and lessees. Thus, as part of the process of modernising stamp duty, the Government were determined to build in an effective anti-avoidance regime. The legislation implementing stamp duty land tax thus contained a number of anti-avoidance measures.

However, we quickly became aware of new schemes and so further anti-avoidance measures were contained in the Finance Act 2004. The hon. Member for Rayleigh alluded to that. The past year has seen the emergence of yet more schemes, some of which are of great complexity. He mentioned one or two of those. Although we have no wish to further complicate the legislation, we remain determined to attack avoidance and ensure that all taxpayers pay their fair share.

In direct answer to the hon. Gentleman's question, I should emphasise that all the measures introduced under the schedule are in response to actual schemes about which Her Majesty's Revenue and Customs have been made aware. None are in response to hypothetical schemes. I hope that that gives further reassurance.

Before I turn to amendments Nos. 95 to 97, I shall quote from an article written by Robert Kent, tax partner at Freshfields Bruckhaus Deringer, in response to a question about making stamp duty land tax savings on future transactions. The article was published on 20 May and commented on the original proposals included in the Budget earlier this year, most of which are retained in this Bill. He wrote:

''In this year's Budget, the Chancellor closed almost all the loopholes used to avoid Stamp Duty on commercial property transactions.''

In many ways, that is a ringing testament to the Government's efforts to provide an equitable regime for all by closing loopholes to ensure a fair contribution. That is why the Committee should support the measures.

Amendments Nos. 95 to 97 affect paragraph 6, which extends the circumstances in which stamp duty land tax group relief can be clawed back. The Government's intention has been clear ever since the clawback provisions were introduced in 2002. If group relief is claimed, and the transferee company leaves the group within three years, the relief should be clawed back. In the absence of such a provision, groups would   be free to wrap a property in a company and sell the shares shortly afterwards without incurring any liability for stamp duty land tax.

Although the Government's intention was clear, schemes aimed at frustrating it began to emerge almost as soon as the clawback provisions were published. The schemes work by interposing within the group transfers that have no commercial purpose but that stop the eventual clawback of group relief. Hence the need for paragraph 6, which in effect causes the transfers to be disregarded, and which means that it is the relationship between the earliest transferor and the ultimate transferee in a three-year period that is considered. If, at the end of that period, those two companies are no longer in the same group, then unless stamp duty land tax has been paid on one of the intermediate transactions, the relief is clawed back.

Amendment No. 95 does not affect the circumstances in which group relief is clawed back, but it does affect which companies are liable to pay the tax. At present, once group relief is withdrawn, the tax can be recovered from the company that originally claimed it, connected companies, or the transferor company. That reflects the fact that if payment has been made for the property the transferor company may still be in possession of the money, whereas the transferee may have been liquidated.

As a result of the changes made by paragraph 6, there will be a right of recovery against the earliest transferor in the three-year period before the ultimate transferee leaves the group. Amendment No. 95 would remove that right of recovery, as I am sure the hon. Member for Rayleigh now understands and accepts.

It is worth pointing out that, where there are successive transfers, the earliest transferor may be the only company carrying on a genuine business, with the other companies being inserted for tax reasons and being quickly eliminated. It therefore seems entirely right that HMRC should be able to recover tax from that company. Hon. Members should bear in mind that in most cases paragraph 6 will only affect contrived avoidance schemes.

Amendment No. 96 would prevent paragraph 6 from applying where there had been a previous clawback of group relief, reconstruction relief or acquisition relief. The hon. Gentleman suggests that that would avoid a double clawback of group relief. I should say, first, that the possibility of a double or multiple clawback exists under the current legislation; it is not created by this measure. However, both under current legislation and in this measure, it is generally possible to arrange matters so that there is no multiple clawback.

Indeed, amendment No. 96 would create new avoidance opportunities, since any previous clawback would prevent paragraph 6 from ever applying, even if the tax related to only part of the property or to a derived interest such as a lease. Although I have some sympathy with the hon. Gentleman's desire to avoid a multiple clawback, the Government have to ensure that we do not create new avoidance opportunities. I feel unable, therefore, to agree to the amendment.  

Amendment No. 97 is also aimed at preventing multiple clawbacks. It seems that it is intended to apply when the ultimate transferee leaves the group at the same time as an intermediate transferee. In that situation, the ultimate transferee would still suffer a clawback, but the intermediate transferee would suffer one only if not all the property had been transferred to the ultimate transferee.

Although that is an ingenious idea, it would be very difficult for such a provision to work in practice. It would also be difficult to know exactly when the amendment applied, as it refers to circumstances that may—I emphasise, may—give rise to a change of control. How would one know what circumstances may give rise to a change of control? The best way to ensure that multiple clawbacks do not occur, as under existing legislation, is to keep the number of successive transfers and changes of control to a minimum.

As with all new legislation, we shall keep the provisions under review, and I shall consider any representations made if, for example, multiple clawbacks were somehow to become a common occurrence. Having said all that and tried to respond in detail to the hon. Gentleman's amendments, I hope that he will withdraw them.

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