Schedule 5
Finance Bill
1:30 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
The amendments will make a slight extension to the scope of one of the anti-avoidance provisions in schedule 5 to stop avoidance scheme promoters introducing even more contrived arrangements to circumvent the effect of the measure.
Paragraph 15 of the schedule is aimed at schemes that create artificial losses from a company’s holdings in offshore funds or similar collective investment schemes. The losses are generated by the scheme making an investment that is bound to decline in value. Shortly after the Bill was published, disclosure was made to HMRC of a scheme that attempts to get round the provisions by arranging for the collective investment scheme to take on a liability for the same purpose, ensuring that the value of the fund declines. The amendments will frustrate such an attempt by broadening paragraph 15 so that it refers to a liability as well as to an investment. The rule in paragraph 15 as a whole will have effect from 6 March, when the measure was announced, but the extension brought about by the amendments will apply from 9 March.
If it is appropriate to do so, Mr. Gale, I want to make a further remark about the broad scope of the schedule. The purpose of the clause and schedule is to close down a number of marketed avoidance schemes of a type for which disclosure is required under the avoidance disclosure regime, and to ensure the comprehensive working of certain anti-avoidance provisions. The total tax protection of the measures is estimated as being in the low billions of pounds.
The schedule tackles avoidance schemes mainly used by companies, which fall under 10 different categories. It also amends the structured finance arrangement rules that were introduced last year to prevent schemes that might stop the rules working. There is also a relaxation of the conditions for obtaining capital gains tax exemption on assets that are sold under structured finance arrangements.
Draft legislation, as I have mentioned, and detailed explanatory commentary, were published with the pre-Budget report and on 6 March. Publication before the Budget was intended to give business an opportunity to comment on whether the draft measures could affect legitimate business transactions. In the event, reaction has been low key, and respondents have not identified any instances in which the provisions might affect legitimate transactions. I have, however, identified the need for the Government amendments, which deal with one particular matter that arose in consultation.
The Government are committed to ensuring that we tackle systematic tax avoidance, and the amendments and schedule will help to ensure that companies that engage in tax avoidance do not enjoy an unfair advantage.