Clause 54
Finance Bill
7:15 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
I hope that the next time the Minister responsible returns to this piece of legislation, we will be celebrating the return of the Paymaster General, who is far more of an expert on these matters than myself.
The clause amends a minor omission in last year’s trust modernisation legislation concerning payments received by trustees, as the hon. Member for Chipping Barnet said. The omission in the Finance Act 2006 meant that in a buy-back the whole payment is taxed. The clause corrects the position so that only the whole payment, less the original subscription price, is taxable. Because the legislation that we are correcting came into force on 6 April 2006, we are backdating the clause to take effect from that date to ensure that nobody loses out. HMRC consulted on the draft legislation, and representative bodies said to us that they were content. A further minor omission in the same legislation has been identified and is corrected by clause 55.
The omission is regrettable but neither HMRC nor the representative bodies, nor any other interested parties, picked it up during the passage of last year’s Finance Bill. A small number of trusts will be affected. Each year, an estimated 20 trusts, out of some 200,000 trusts that make a return, will receive a payment from a company’s purchase of its own shares. The return for 2006-07 had to be finalised by HMRC last summer before it was aware of the omission. However, the return is based on how the legislation was always intended to work, and is rectified by the clause.
HMRC issued guidance advising trustees affected by the omission to wait until the Finance Bill received Royal Assent before making their return. For the small number of cases that are likely to be affected by the clause, return guidance will lead trustees to enter an amount in accordance with the legislation as was always intended. Therefore, taxpayers who are not aware of the omission will not be disadvantaged. The consultation did not last as long as we would have liked, but we are satisfied that we consulted properly and, as a result, we have addressed the omission that the hon. Lady identified.