Schedule 19
Finance Bill
9:00 am
Ian Pearson (Economic Secretary, HM Treasury; Dudley South, Labour)
The Government take a different view of amendment 169. We believe that it would remove one of the anti-avoidance provisions that we are making in new section 397BA of ITTOIA. The purpose of this part of the legislation is to provide the Treasury with the flexibility to change the classification of an otherwise qualifying territory to non-qualifying, so that the UK’s tax system can reflect and respond to future changes in foreign tax systems. It would, for example, allow the Government to respond to the development of a new regime in a tax haven.
The Government do not intend to exercise the power unless exceptional circumstances arise in which there is a substantial risk of loss to the Exchequer, and any changes would be subject to the affirmative procedure. A similar provision exists in the transfer pricing rules, so the approach is well understood. It has never been necessary to use the provision in the transfer pricing rules, but we believe that it acts as an important deterrent to prevent the most blatant forms of avoidance.