(Except clauses 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84, schedules 1, 18, 22 and 23, and new clauses relating to microgeneration) - Clause 27
Finance Bill
1:00 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
We are pleased to have you back in the Chair, Mr. Gale. You missed a most illuminating and lengthy sitting this morning. I hope that we can reach a swifter conclusion on this clause, not least because of the turnout so far on the Opposition Benches.
Several points were raised this morning, and I hope to give the Committee further reassurance on a couple of points of detail. At the end of the sitting, I was explaining the importance, which paragraph 13 of the guidance stresses, of considering all the circumstances in the round. I explained two examples in which a fall in the value of FTSE 100 shares gives rise genuinely to a loss, which can be offset elsewhere on gains, where the tax advantages are incidental but the transactions are genuine. I also explained the straightforward way in which statutory tax relief can be passed between husband and wife in a way that allows a loss to be set against a gain. The clause does not interfere with that normal tax practice and planning.
There was much discussion about whether the guidance provides sufficient clarity. As I said this morning, Her Majesty’s Revenue and Customs is working with the representative bodies on improving the guidance, and we will publish revised guidance before Report. However, it is important to remember that for the vast majority of people, the guidance will not be relevant, as they will not be caught by clause 27, which contains a targeted anti-avoidance rule to counter tax-avoidance schemes that make use of contrived capital losses.
The legislation was first published in draft with the pre-Budget report. At the same time, HMRC also published a statement setting out why it was necessary and the key principles that underpinned it. The key principle is that relief for capital losses should be available only if a person has suffered a genuine commercial loss and a real disposal.
As was recognised this morning, there is always a grey area, a question of debate, in dealing with tax avoidance. The HMRC statement of principle and guidance makes that area for debate as narrow as possible. It is necessary to do that in guidance in order that we have flexibility. These things cannot all be tied down in the Bill. However, as I said this morning, the person entering into the arrangements is best placed to decide whether gaining a tax advantage was a main purpose of the arrangements. The sort of arrangements that the clause is aimed at are not entered into by accident. People know when they are setting out to avoid tax, and the clause is intended to catch them if they are.
The amendments, taken together, would simply weaken the targeted anti-avoidance rule in the clause. They would introduce uncertainty for those who do not seek to avoid tax and would leave loopholes for those who seek to avoid paying the right amount of tax, while introducing unnecessary regulation-making powers for HMRC. I therefore ask the Committee to reject the amendments, and I reaffirm my commitment to providing all members of the Committee with the detailed and updated guidance before Report, which I am sure will make for interesting reading for all, but especially for the hon. Member for Braintree and Mrs. Newmark in case there is nothing decent to watch on telly.