Private Rented Housing

Part of Orders of the Day — Finance (No. 2) Bill – in the House of Commons at 7:15 pm on 9th May 1988.

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Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames 7:15 pm, 9th May 1988

The hon. Members for Workington (Mr. Campbell-Savours) and for Islington, South and Finsbury (Mr. Smith) referred to the wider changes that had been made in the business expansion scheme. The hon. Member for Workington said that he had been fairly favourably disposed towards the scheme originally. Indeed, I remember that. If he will forgive my saying so, it was slightly curious to observe his anxiety about the new ceiling that we have imposed because he is worried that it might affect genuine growing businesses, whereas the thrust of much of what was said by other Opposition Members was that the Government had not done enough to curb abuses under the scheme. I am grateful to the hon. Member for Workington for saying that he approaches the matter with an open mind.

The hon. Members for Islington, South and Finsbury and for Dunferline, East (Mr. Brown) did not acknowledge what has happened under the other changes in targeting the BES much more on the smaller company. One reason why we have been able to do that, as my hon. Friend the Member for Dover (Mr. Shaw) said—I know that he is strongly in favour of the change that has been made—is that after several years' experience of the scheme we now have a venture capital industry that is more able to finance start-ups and new businesses. We do not need a tax relief that goes on for ever for that sort of business. After a few years' experience we decided that it was better to return to the original purpose, which was to concentrate on the smaller business and start-ups.

The hon. Member for Islington, South and Finsbury criticised the BES because, he said, it has started up too many businesses in the south and not enough in the north. He might have acknowledged the fact that the change that we are to make is likely to have a much more favourable effect on areas such as the north where there are fewer entrepreneurs and start-ups.

As my hon. Friend the Member for Elmet (Mr. Batiste) said, it has been widely commented that the changes are likely to bring about a much more even spread of BES activity throughout the country. I am sorry that Opposition Members do not feel more able to welcome the changes in the scheme, which have been widely welcomed outside and which are overwhelmingly sensible.

The hon. Member for Workington raised a specific point about avoidance under the BES as applied to the new lettings. He described a situation in which somebody might let a property to an associated person. My hon. Friend the Member for Dover drew his attention to schedule 4(4). That was a reasonable point to make, but I believe that the hon. Gentleman's imagination has been at work. He will be aware that the provisions for the BES as applied to rented property are also governed by other general BES provisions.

Section 289(11) of the Income and Corporation Taxes Act 1988 has a general anti-avoidance provision as applied to the BES. It says: An individual is not entitled to relief in respect of any shares unless the shares are subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose, or one of the main purposes of which, is the avoidance of tax. That provision covers the point made by the hon. Gentleman.