(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92)
Finance Bill
4:30 pm
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I am grateful to my hon. Friend for raising that question. That is part of the challenge, because, as he stated when we discussed the reduction in small companies tax on the Floor of the House, there is a range of models for the legal structure of businesses, and some partnerships or unincorporated sole traders will be seeking to take advantage of that. Some incorporated businesses will also seek to take advantage of that, and the regulatory impact assessment sets out the proportion of people in that category. The Government expect the measure to be taken up by about 15,000 people. They will be self-employed, but deemed to be partners in companies, so it will obviously affect them. I do not know the size of my hon. Friend’s company, but of the 75,500 businesses that could benefit, the Government expect 30,000 small to medium-sized companies and 5,500 large companies to do so. We need to ensure that the rules are reasonable and fair and that the compliance costs are kept under control as well. That is one reason for my proposed date change, which I commented on earlier.
My hon. Friend asked about businesses with a year end on 30 April. The risk is that they will end up having to shift the two-year period, so that profits made in earlier years do not apply. However, I am sure that the Minister will want to respond to my hon. Friend’s comments directly.
Finally, some are concerned about the interaction between paragraphs (1) and (2) of schedule 6 and the anti-avoidance and sideways loss relief provisions in section 74A of the Income Tax Act 2007. I have been asked whether the operation of provisions in section 74A will restrict the losses that can be used in the current tax year and each of the three preceding tax years. The purpose of the discussion is threefold—to ask the Minister about tidying up the accounting periods; to look at the way in which paragraph 3(3) works in practice and whether paragraph 3(4) is redundant; and to probe the Government’s thinking on the cost of this measure. Is this the most effective way of providing relief to businesses? Have the Government accurately estimated the cost to the Exchequer of introducing this measure?