Schedule 29 - Gains and losses of a company from intangible fixed assets

Part of Finance Bill – in a Public Bill Committee at 10:15 am on 13th June 2002.

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Photo of Mark Hoban Mark Hoban Opposition Whip (Commons) 10:15 am, 13th June 2002

I want to raise a couple of points about the impact of changes in markets on the tax cost of the measures. Over recent years, telecom and information technology companies have incurred huge losses as a consequence of the write-down in value of assets because the consideration that businesses paid for those companies some years ago is no longer held to be a fair reflection of their market value. What is the implication of future write-downs on the tax cost set out in the Red Book? If a company such as Vodafone wrote off £0.8 billion of the value of assets acquired from Mannesmann, the transaction would not be covered by the schedule, but if future transactions of a similar magnitude incurred a similar write-down, that might give rise to some variations in the revenue.

In its representation, the Institute of Directors welcomed the new regime in general but went on to say:

''the great extent of legislation suggests that the plot, of simply following the accounts, has been somewhat lost.''

The Bill and the explanatory notes are somewhat longer than FRS 10, on which the measure is meant to be based.