Corporation tax treatment of the oil and gas industry

Part of Finance Bill – in the House of Commons at 8:15 pm on 5th September 2016.

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Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury 8:15 pm, 5th September 2016

No. I am sorry, but I want to move on to new clause 11, tabled by the hon. Member for Salford and Eccles. It proposes an independent review into the efficacy of the taxation of securitisation companies. The Government do not consider that necessary. Regulations introduced under a Labour Government in 2006 applied specific corporation tax rules to the profits of securitisation companies. The regulations contain several anti-avoidance tests. As announced in the Budget, HMRC is reviewing these regulations to reflect recent changes to accounting standards and market developments. A consultative working group, made up of independent professional advisers specialising in securitisations, HM Treasury officials and HMRC technical specialists, has met four times since September 2015 and is looking carefully at a range of issues. Revised regulations developed with the group are expected to be published in draft for public consultation later this year or early next year. As this review is already under way, a further assessment is not required.

On Government amendments 152 and 153, clause 63 and schedule 9 make changes to ensure that the patent box operates in line with the newly agreed international framework resulting from the OECD’s base erosion and profit shifting action plan. As currently drafted, the changes in the Bill could result in different definitions of the term “qualifying residual profit” applying to the same parts of the patent box legislation. The amendments address that problem by providing a coherent and consistent definition for that phrase.

I will comment briefly on Opposition new clause 10. The new clause would require the Chancellor of the Exchequer to publish within six months of the passing of the Bill an independent report giving an assessment of the value for money and efficacy of the patent box. The Government do not support the new clause. We only now have full data for the first year of the patent box, and as such the report required by the new clause would not take into account the revisions to the regime made by the Bill. The proposed one-off publication would also fall short of the plans the Government already have in place to publish annual official statistics on the patent box.

The hon. Lady mentioned that she wished to see more evidence of the impact of the patent box. It is worth noting that, for example, GSK recently attributed a £275 million investment to the UK’s competitive tax regime and specifically mentioned the patent box as a reason to invest.

A number of Government amendments have been tabled to clause 65 and schedule 10, which legislate to counteract avoidance involving hybrid mismatches. The amendments make changes to the legislation to ensure that it works as intended and does not create unintended impacts in terms of its interaction with other areas of the UK tax system. The amendments are necessary to secure the forecast yield from the measures.

My right hon. Friend Mark Field made a typically thoughtful intervention. He mentioned turnover tax versus profits tax—I suspect that is a theme to which he might return. It is worth noting that a turnover tax can produce unfair outcomes, such as penalising businesses that make a loss and those in competitive markets. As I say, I am sure it is an issue to which he may well return.

The Government are committed to making our tax system fundamentally fair, ensuring that people and businesses pay what they owe and contribute to our nation’s success. I therefore once again urge the House to reject the amendments and new clauses tabled by the Opposition.