Schedule 5
Finance Bill
1:30 pm
Theresa Villiers (Shadow Chief Secretary To the Treasury, Treasury; Chipping Barnet, Conservative)
I am grateful for your guidance, Mr. Gale. I, too, hoped to deal with the schedule in that way.
Schedule 5 seems to me to be a pretty accurately targeted measure, focusing on what are, as the Economic Secretary said, highly complex and artificial transactions undertaken solely with tax avoidance in mind. It seems to the Opposition entirely reasonable for HMRC to move against those schemes. As ever, it is worth pointing out that there will be yet more complicated legislation, but I must concede that, in that context, it will be difficult to come up with simple legislation to deal with the problem. My research has not managed to expose any significant technical flaws that would concern the Committee, and like the schedule, the amendments that the Economic Secretary has proposed seem to be similarly targeted, so we will not oppose them.
Consequently, I have for the Economic Secretary just a couple of questions about the schedule. First, in the explanatory notes to paragraphs 9 and 16, HMRC does not think that the respective schemes, which the paragraphs target, work anyway. Essentially, the new legislation before us is only a caution. I should be interested to find out whether that means that the Government do not have the same certainty about the transactions targeted in the rest of the schedule. Are they holding their hands up or are they still challenging those transactions?
Secondly, I have a question about paragraph 18, which is intended to extend the anti-avoidance provisions in paragraph 26 of schedule 26 to the Finance Act 2002 in order to cover all relevant situations in which a company fails to exercise in full all its rights under an option, rather than just the situation in which it abandons an option. There have been attempts to circumvent paragraph 26 of schedule 26 to the 2002 Act, which bites on the abandonment of an option by utilising schemes that involve partial exercise.
Is not that situation also covered by paragraph 23 of schedule 26 to the 2002 Act, which denies tax relief for debits related to an “unallowable purpose”? I should be grateful if the Economic Secretary could explain whether the situation covered by the further legislation that we are considering—paragraph 18 of schedule 5 to the Bill—is actually already covered by paragraph 23 of schedule 26 to the 2002 Act. Is paragraph 18 yet more precautionary legislation?