Schedule 15
Finance Bill
12:15 pm
Kitty Ussher (Economic Secretary, HM Treasury; Burnley, Labour)
The hon. Gentleman raises a number of different questions and perhaps it will help the Committee if I first explain what we think the effects of the amendments will be. I believe that they are unnecessary, but perhaps they are probing amendments. I will then answer the specific points of substance before saying why we are legislating in this area.
The amendments seek to clarify how the market value rules introduced by clause 34 and schedule 15 intend to interact with similar rules for capital gains tax. They appear to be based on a concern that the legislation will override and affect the capital gains rules set out in sections 161 and 173 of the Taxation of Chargeable Gains Act 1992. I am sure that the hon. Gentleman will be relieved to know that that concern is unfounded. The schedule will have absolutely no impact on the operation of the capital gains legislation, and sections 161 and 173 of the 1992 Act will continue to apply in the same way as they do currently. Had our intention been to override those sections of the 1992 Act, we would have explicitly amended or repealed them. We have not done so because that is not our intention.
I remind the Committee that schedule 15 will do nothing more than maintain the status quo, including the way in which the market value ruling in Sharkey v. Wernher interacts with capital gains tax rules, and I will explain why that is the case. Businesses will continue to be able to elect to disapply the market value rule for the purposes of capital gains tax under section 161 of the 1992 Act, in the same way as they have done in the past. That will include companies within the same group, which will be able to make such an election as they do currently under the provisions of section 161 as applied by section 173. Therefore, I do not feel in general that those amendments are necessary, but hope that my explanation has provided some background.
Turning to some of the wider points, the hon. Member for Fareham wanted to know where the new legislation will leave the statement of practice to which he referred. The statement of practice A32, as it is properly called, is part of HMRC’s published guidance. That sets out how HMRC applies the market value rule in Sharkey v. Wernher in practice. Once the rule is legislated in the Bill, as we propose to do today, there will be no need for a separate statement of practice, but there will be no practical effect on businesses, which will continue to operate the rule in the same way as they have always done.