Clause 41
Finance Bill
9:15 am
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
I have just a couple of comments on schedule 20, which the clause introduces. First, a word of praise, which does not come very readily from my lips on these occasions, but there has been some very positive comment on the consultation for clause 41 and schedule 20. That consultation has worked well and improved the schedule. However, one or two issues have been raised with me.
Companies have used the late interest rules to get a tax reduction for interest expenses when they have needed it. That has particularly been the case with part equity-backed businesses. If an interest reduction cannot be used in the current year, it will be carried forward as a non-trade debit that can be offset against non-trade credits. That was not felt to be particularly useful, so companies would therefore trigger the debit when they could use it or needed it. The schedule takes the flexibility away on timing for finance costs.
The Government’s counter-argument might be that, as the legislation has been partly introduced for anti-avoidance purposes, that might well be the purpose of removing that flexibility. However, companies could still obtain tax relief when the interest is paid using companies’ non-qualifying territories—for example, Jersey. That means that they cannot refer an accruals basis for tax relief when they need to. Will the Minister comment on the interaction between the schedule and the debt cap rules? Some clarity is required and I would be grateful for his thoughts on how that clarity might be introduced.