Offshore Receipts in Respect of Intangible Property

Part of Finance (No. 3) Bill – in the House of Commons at 4:30 pm on 20th November 2018.

Alert me about debates like this

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 4:30 pm, 20th November 2018

With the House’s permission, I shall continue with my comments.

We need a far more serious and engaged approach to countering tax avoidance and evasion. Our amendments are an attempt to provide that—at least within the scope of the limited measures in the Bill. First, with amendments 3 and 4, we are calling for public registers for beneficiaries of trusts who have relocated or plan to relocate to other EEA countries and who seek to defer their corporation tax exit charges, or those relating to capital gains tax, through a payment plan, as the Minister intimated. The Government’s action in this policy area has been necessitated by recent decisions of the European Court of Justice, which considered the compatibility of member state exit charges with article 49 of the treaty on the functioning of the European Union.

As the Minister intimated, the measures in the Bill will enable those who adopt an exit charge payment plan to pay in six equal instalments, albeit with interest. Given that this approach is necessitated by EU law and applies to individuals and trustees who move to another EU or EEA country, and given that some Government Members sadly flirt recklessly with the prospect of a no-deal Brexit, I would have expected the Government to explain what might happen in this policy area as our relationship with the EU changes. That was not the case in respect of the information about these measures that we were given; nor does anything in the Bill lead us towards greater transparency for trusts, which is desperately needed.

As of January this year, all trusts that pay beyond a very modest level of tax have had to register with HMRC through its trust registration service, but that is a private register, not a public one. The new iteration of the EU’s anti-money laundering legislation will require changes in the UK approach. First, it makes business-like trusts and those managed in the EU subject to reporting requirements, so potentially enlarging the category of trusts that have to register. Secondly, it enables parties with a legitimate interest to access information about those trusts—not just law enforcement agencies as currently—although the decision on who qualifies as having such a legitimate interest will be under the discretion of member states. Finally, this new legislation requires trusts owning EU companies to disclose full information about trustees, settlors and beneficiaries.

The Conservative Government are shifting policy on exit charge payment plans in the interests of the firms and individuals who benefit from that deferral of tax, but they are not changing policy to make trusts more transparent, which will soon be required by the EU. That amounts to yet another contradiction within the Government’s proposed relationship with the EU, but perhaps that was predictable, given the Conservatives’ long-term determination to protect trusts from scrutiny by tax authorities and those with a legitimate interest in their beneficial ownership. It is most explicit in David Cameron’s personal intervention to try to block EU action in this area.