Schedule 24
Finance Bill
9:45 am
Stephen Timms (Financial Secretary, HM Treasury; East Ham, Labour)
Welcome back to the Chair, Mr. Hood. I would like to say a few words about clause 48 and schedule 24 before responding to the hon. Gentleman’s amendment.
Current tax law contains targeted anti-avoidance rules to ensure that amounts economically equivalent to interest are charged corporation tax in the same way as interest, instead of in a lower tax way. Clause 48 and schedule 24 replace those piecemeal measures with a rule that sets out the principle comprehensively. It is the result of consultation over the past couple of years on the use of principles-based legislation to tackle avoidance involving disguised interest. Subject to some exclusions, a return equivalent to interest will be charged to corporation tax as interest in all circumstances where it would not currently be taxed as income.
The schedule ensures that companies party to arrangements that produce interest for them in a disguised form are subject to corporation tax in the same way as if they had received actual interest. It replaces a range of targeted rules with the comprehensive rule that I have described, which charges companies corporation tax on all returns equivalent to interest in the same way as on interest, unless a specific exemption covers the returns. There are specific exceptions for arrangements where it is reasonable to assume that avoiding corporation tax is not the main purpose, or where the return simply results from an increase in the value of certain shares held by the company.