Schedule 16
Finance Bill
12:00 pm
Kitty Ussher (Economic Secretary, HM Treasury; Burnley, Labour)
As the hon. Gentleman has just said, the amendments would remove from schedule 16 the provisions replacing the current definition of “investment transaction” in primary legislation with a new power, allowing the commissioners for HMRC to designate in regulations any transaction as an investment transaction.
It may be of use to Opposition Members if I say that our approach is favoured both by the Alternative Investment Management Association and the Investment Management Association, which, together, represent the overwhelming majority of industry participants. During the consultation, AIMA said that the industry wanted a new approach that would
“amend the legislative procedure to simplify/speed up the approval process”
for new transactions, and noted that the
“ability of the UK tax authorities to respond quickly to changes is important in a rapidly evolving industry”.
Schedule 16 delivers those benefits and is what the industry wants.
I take the general view that the City of London and the financial services sector is a jewel in Britain’s crown and one of our most important industry sectors, employing more than 1 million people throughout the country. Currently, about $400 billion is under management in the UK, and we are No. 2 in the world in the sector. Hundreds, perhaps thousands, of people are employed, so when the main industry bodies say that we can do something to make us as attractive, if not more attractive, to investment and expansion in the future, that is something that Governments of any colour should listen to. The amendments would undermine the approach that we are taking and leave the law exactly as it is. That is contrary to what the industry expressly sought during consultation and would mean that we could not deliver the simplification and speedy response to product innovation that are the drivers for what we are trying to do here.
I understand the general point that the hon. Gentleman makes. It is good government to scrutinise as much as possible in Committee and on the Floor of the House. We have sought to square the circle by giving positive assurances. HMRC has already given assurances as to how this power will be used. It is important that these are on the record, so I shall briefly reiterate them. All transactions that currently meet the definition of “investment transaction” in primary legislation will be included in the regulations made under the new power, so investment managers can be reassured that all transactions that currently qualify will continue to do so. HMRC has also said that it will agree with the industry and publish in guidance a statement of assurance about handling any future changes to the transactions that qualify for the investment manager exemption.
HMRC is also committed, as indeed am I, to maintaining the dialogue with the industry and its representative bodies in relation to this and other issues of interest or concern—the dialogue out of which these proposed legislative changes have themselves arisen. It may be helpful if I set out how I see this working in practice. HMRC would not spontaneously decide that a new type of product should be added to the list, but the industry would tell us about an innovation or a new type of derivative that it wants to trade in because it thinks that it would help its business. The product would not be doing any harm to anyone else, and industry will ask us to clarify that the rules mean that it is still exempted. We will have a look and say yes.