Clause 53
Finance Bill
9:30 am
Jane Kennedy (Financial Secretary, HM Treasury; Liverpool, Wavertree, Labour)
It was acknowledged in the pre-Budget report that the schedule was having a detrimental effect on some transactions where there is no risk of a tax loss. It is difficult to deal with such transactions without opening up new opportunities for tax loss, and any action that we take must be taken in close consultation with the industry. We intend to do that, and we are looking closely at the problem.
The hon. Member for South-West Hertfordshire asked some thoughtful questions. The legislation in schedule 10 dealing with partnerships is complex because the partnership structures used by companies are complex, and the schedule had to deal with those complexities. Where a business is carried on by companies in partnership, the charge and relief are allocated to the partner in proportion to their shares in the partnership profits. That gives the right result as long as the business continues to be carried on by a partnership, but not where a business is transferred from a partnership to a single company. In that situation, the selling partners are charged for tax, but there is no mechanism for delivering relief to the successor company because it is not a partner.
More generally, clause 53 makes minor amendments to the anti-avoidance provisions introduced by schedule 10 of the 2006 Act. A minor defect means that the schedule does not work fairly when the whole trade is transferred by a partnership to a single company. The clause will ensure that schedule 10 operates fairly, even in that unusual situation. Furthermore, to ensure that no one can have been adversely affected, the changes introduced by the clause will be deemed always to have had effect. That degree of retrospectivity has been warmly welcomed.