Clause 54 - Loan relationships
Finance Bill
4:30 pm
John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)
I am not entirely sure that I understood what the hon. Gentleman is asking me to clarify. However, I have two or three points to make that he might find helpful and, if he will bear with me, in doing so I might cover the matter that he was concerned about.
Clauses 54 and 55, as the hon. Gentleman suggested, will broadly ensure that the formation of an SE by merger should, as far as the UK loan relationship and derivative contracts regime is concerned, be tax neutral. In extending the provisions of the loan relationship and derivative contracts regime to give companies that certainty, there is a need, as I am sure the Committee recognises, to ensure that the provisions are not taken advantage of for the purposes of avoiding tax.
New paragraph 12B(5) in this clause and new paragraph 30B(5) in clause 55 contain an anti-avoidance rule. New paragraph 12B(6) in this clause and new paragraph 30B(6) in clause 55 both state that the provisions of sub-paragraphs (5) will not have an effect
''if before the merger Her Majesty's Revenue and Customs have on the application of the merging companies notified them that Her Majesty's Revenue and Customs are satisfied''
that the transaction
''is effected bona fide commercial reasons, and does not form part''
of an arrangement to avoid tax.
I hope that the hon. Member for Braintree appreciates that both new sub-paragraphs (6) aim to make it clear that HMRC is fully prepared to give pre-transaction clearance to any company or companies that are considering merging to form an SE. However, there is no existing statutory clearance procedure within the loan relationship and derivative contracts regime under which that can be given. The procedures will therefore have to be made clear in guidance. I hope that the hon. Member for West Suffolk is satisfied with that explanation.