Schedule 3
Finance Bill
11:15 am
Philip Hammond (Shadow Chief Secretary To the Treasury, Treasury; Runnymede and Weybridge, Conservative)
As we have had several debates on schedule 3, I would not rise at this stage if it were not that some issues have arisen since amendments were tabled. I would like to run through those five—or perhaps six—points now, in the hope that the Minister will be able to comment on them.
There is an overall concern that entrepreneurs relief has been lifted from the old retirement relief. That system had become complex and, at the time it was abolished, had begun to throw up problems. It appears that some of those problems have been imported into the entrepreneurs relief. May I ask the Minister to consider whether the restriction on personal companies is appropriate in a world where the limited liability partnership is available as an alternative business structure, and is not subject to any such restrictions? Are the Government pushing entrepreneurs towards the limited liability partnership route? That would be the effect of the different treatment of partnerships and companies. People who expect to have equitable interests below 5 per cent. would be strongly advised to go down that route, where they would not be subject to a disqualification—which they would be in a company—for holding less than 5 per cent. That seems inequitable. Unless the Minister says that there is a deliberate strategy to encourage certain types of business to go down that route, it looks like a careless failure to update the dusted-off retirement relief to reflect that alternative business structure, which was not available when retirement relief was operating.
Then there is the whole or part of a business test for a disposal, which is distinct from taper relief, where all business assets were eligible. That test, which also applied in retirement relief, is difficult and problematic and is likely to lead to complex disputes and probably litigation.
The second issue is transitional relief. Why did the Government set their face against at least a transitional—perhaps five years—lifting of the many restrictions on reliefs? Instead, they forced a mad scramble for the exit door, with sub-optimal outcomes for both the economy and individuals, which left many aggrieved. Would be vendors who could not get it done in time for the abolition of taper relief are yet another group looking forward to the opportunity to give the Government a good kicking in a general election.
The third point relates to proposed new section 169I(6)(b) on page 120, line 42. The requirement to be an officer or an employee is iniquitous because it does not mirror the provisions in respect of limited liability partnerships. The Government should reconsider that. If they have a principled objection to investors who are not involved in the day-to-day running of the business benefiting from entrepreneurs relief, the provisions for the disposal of interests in limited liability partnerships are defective. The practical effect is that an investor taking a role in a limited liability partnership will be entitled to entrepreneurs relief on the disposal of his interest, while an investor in shares in a company, if he is not an officer or employee of that company, will not be entitled to entrepreneurs relief.