Clause 37
Finance Bill
6:00 pm
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I welcome you to the Chair, Mr. Atkinson, for the graveyard slot—well, I hope it is the graveyard slot—of today’s sitting.
Clause 37 cropped up in the Chamber, earlier today, during Treasury questions, when the hon. Member for North-West Leicestershire (David Taylor) raised a concern about whether the clause would make it easier for businesses to participate in tax avoidance schemes by being able to engage in transactions that move businesses offshore without letting the Treasury know. He asked whether we were in danger of making it easier for people to engage in the sort of transactions about which the hon. Member for Southport seemed to be concerned during the previous debate. In a sense, the arguments of the hon. Member for North-West Leicestershire have been lent some support. Tax advisers have told me that they welcome clause 37 and schedule 17, which must instantly cause those considering such matters from the other side of the debate to think, “There must be something here to think about. Will this be a charter for encouraging such activity?”
My understanding is that the existing regime for Treasury consent will be swept away. However, one issue that comes up in the correspondence and debate on this matter is whether the regime that the Treasury is considering will be effective in helping businesses to comply and in helping to promote certainty for taxpayers. The existing regime had a set of general consents—document M03/88—and if someone is taking part in one of those transactions, there is no requirement to notify the Treasury or to gain its consent. Clause 37 paves the way for the repeal of that legislation. We now have a new set of reporting requirements for certain transactions exceeding £110 million. On one level, the Government are saying that they will remove the Treasury consent regime and that there will be no replacement for the general consents. However, HMRC has a regulatory power under the Bill to designate excluded transactions, augmenting the list of excluded transactions in paragraph 9 of schedule 17. Until HMRC exercises its powers though, taxpayers will have to report more transactions than at present.
The list of transactions in paragraph 9 is not as broad as that in the current general consents, and there is a concern that many common commercial situations will need to be reported, resulting in a greater compliance burden. That runs counter to the Government’s aim and to the expectation of the hon. Member for North-West Leicestershire and others.
I have a short list—you will be pleased to note, Mr. Atkinson—of those existing consents that people have said they would like to see under the new regime. They include the issue of shares by a non-UK company to a UK company, the issue of shares by non-UK companies to a third party, rights issues, the issue of debentures and the issue of shares by Commonwealth countries. I would be grateful for the Minister’s thoughts as to where the excluded transactions regime will get to.
There is also an issue relating to private equity funds and limited liability partnerships. The new rules, in paragraph 5 of schedule 17, require reporting by UK bodies corporate that control non-UK companies. However, in certain situations a UK body corporate might be considered to control non-UK companies, but reporting might be considered inappropriate. For example, many private equity structures include a UK body corporate such as a limited company or a limited liability partnership as the fund’s general partner. If that fund holds UK investments, the general partner might be required to report transactions over which it has little or no influence. There could be an amendment to the effect that bodies corporate that are general partners of collective investment schemes, as defined by the Financial Services and Markets Act 2000, could be exempted. That would avoid inappropriate reporting requirements.
It would help if the Minister gave a bit more background to the proposals in clause 37 and schedule 17, to provide a clearer understanding of how he expects the new regime to work. How can he reassure his hon. Friends that this is not a tax avoidance charter and at the same time give comfort to businesses that it will not lead to a much more onerous regime?