Clause 68 - Qualifying contracts for unallowable purposes

Part of Finance Bill – in a Public Bill Committee at 6:30 pm on 11th June 2002.

Alert me about debates like this

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster 6:30 pm, 11th June 2002

I rise to speak to the clause, because I am sure that we shall not have a stand part debate, and to the amendments.

I give credit to the Government for the significant consultation exercise. I have been in touch with a number of institutions in the City of London and we have tabled few amendments on the provisions because, as was rightly pointed out, there have been at least three stages of consultation during the past 18 months or so. For that, the Government must be congratulated.

Equally, past legislation in this area has not been unimpeachable. We have a moving goal because of fast-moving, globalised finance, and the subject is technical so amendments must be made from time to time. The advice that I have received from several institutions suggests that at this juncture they are at

least comfortable with most of what is proposed in the clause. The proof will be in the pudding. The concerns that have been expressed by my hon. Friend the Member for Arundel and South Downs and others, here and elsewhere, is that the Treasury has a tendency to meddle in so many areas. Although certain aspects of its work will be welcomed, other bits will be seen as tampering for the sake of it.

The City of London is an important financial centre and a centre of invisible earnings for this country. I have a philosophical concern that a feeling exists that taxes must be raised, and that banks and other financial institution must go about their business ensuring that they pay a fair amount of tax; it is somehow seen as illegitimate to avoid tax and utilise the tax system. The idea that financial institutions should be willing to take everything on the chin and not use the system to their benefit is a matter of concern.

The Financial Secretary assured us that it will be up to a financial institution to go to the local tax inspector for advice in advance. However, the area is extremely technical, so I wonder whether in practical terms that will give much comfort to financial institutions, which could find themselves in a difficult position when acting on behalf of clients—they may find that a structure that they have put in place collapses and becomes tax liable. A difficulty that the hon. Lady pointed out was that institutions will receive tax advice from a leading tax QC or law firm, but that tax advisers must give balanced advice. My concern is that, likewise, the local tax office would give an on-balance decision only. When large sums of money are at stake in some of the more complex structures that have been introduced to the financial services sphere, that is not good enough.

Some of the amendments should be welcomed. The City institutions to which I have spoken feel that there has been a significant and acceptable level of consultation. I hope only that we will not have to unpick everything in the next two or three years when some of the implications become apparent.