Clause 41
Finance Bill
9:15 am
Ian Pearson (Economic Secretary, HM Treasury; Dudley South, Labour)
Well, we always consider these matters carefully. It is our judgment that a period of 12 months is a reasonable period of time to allow companies to rearrange loans if they need to do so.
The point was made about whether or not an election should be allowed for private equity groups to deduct interest on a paid basis, if they want to. In response, I would say that allowing companies the choice to deduct interest, either when it accrues or when it is paid, would go against one of the key principles of the corporation tax rules on the taxation of interest. Interest is taxable and relievable as it accrues in the accounts. We are not persuaded that an exception needs to be made for private equity. However, HMRC will work with the industry in improving its guidance in this area.
The point about the interaction with the debt cap was made by the hon. Member for Fareham. Specifically on that point, I can say to him in response that ordinary loan relationship rules, such as late interest, are applied before the debt cap applies. That is another matter that we will cover in the guidance.
As I have said before, HMRC is in discussions with the private equity industry about these matters and we believe that they can be satisfactorily addressed through guidance. The industry is happy with that.