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Clause 1 — Main rate of corporation tax for financial year 2011

Part of Finance Bill – in the House of Commons at 8:45 pm on 12th July 2010.

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Photo of Stephen Timms Stephen Timms Shadow Financial Secretary, Shadow Minister (Digital Britain) 8:45 pm, 12th July 2010

Indeed, and I am certainly not arguing against the long-established mechanism allowing tax losses to be used in that way. I am simply querying, just as a matter of fact, whether that is the reason why this Bill only makes one of the four promised year's reductions in corporation tax. I have certainly not come across any other suggestions as to why the Bill is doing that in that way. People who have deferred tax liabilities-as opposed to the banks having deferred tax credits-would benefit from early enactment of the lower rate. Typically, that is people such as manufacturers. If that is the reason, this is, sadly, another case of helping out the banks at the expense of manufacturers.

Surely the Institute of Chartered Accountants in England and Wales is right to say that

"to provide better certainty for businesses" there should be legislation

"as soon as possible for the proposed reductions in the main rate of corporation tax".

When will the Government legislate for the remaining reductions? Will they do so in the Finance Bill that we have been promised in the autumn? Are we really going to have to wait for four years of Finance Bills to complete these reductions, as the Chief Secretary suggested, or can we look forward to legislation in the Finance Bill No. 3 of 2010? If certainty for business is the aim, it surely must be done this year at least.

When do the Government intend to introduce their changes to the rate of capital allowances and the annual investment allowance? I listened carefully to what the Minister said about that and perhaps I missed the point but I did not quite grasp which piece of legislation he envisaged those changes being made in. Will they be in the further Finance Bill in the autumn or will they await next year's Bill? By that time, I suppose we might have some further data on the actual change in business investment in the next 12 months and how that compares with the change on which the Chancellor is pinning his Budget arithmetic.

There is something else about which the Bill is silent but on which we might have expected some change: the differential compared with the main rate of corporation tax inside the North sea ring fence. The ring fence for North sea operations rightly prevents taxable profits from oil and gas extraction in the UK and the UK continental shelf from being reduced by losses from other activities or by excessive interest payments. The ring-fenced corporation tax rate was the same as the main corporation tax rate, until the previous Government reduced the main rate from 30% to 28% from 1 April 2008; we left the ring-fenced rate at 30%. Now that the main rate has been announced as falling to 24%, do the Government intend to leave the ring-fenced rate at 30% throughout the next four years, thus trebling the differential from two to six percentage points or is a reduction to the ring-fenced rate being considered, perhaps along with some other changes to the fiscal regime for oil and gas extraction?

Let me finish by asking one further question. As I reminded the House, it was the previous Government's explicit aim that corporation tax in the UK should be the lowest among the G7 economies, and we succeeded in achieving that aim. That is one of the reasons why the UK has been so successful over the past decade in attracting so much overseas investment into our economy. Do the present Government intend to ensure that we continue to have the lowest rate of corporation tax in the G7? Will that commitment be maintained?

As I explained at the outset of my remarks, it is not my aim to oppose this clause, but I hope that the Minister will provide some explanation for the omissions I have highlighted, and in particular give an account of why the remaining reductions in the rate of corporation tax have been delayed, and say when the legislation for them will be introduced.

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