I beg to move amendment No. 167, in page 80, line 15, at end insert
'or for the transfer of the whole or part of a business or interest in a business carried on by him or by him and others in partnership;'.
Clause 102 makes two changes to the rules for relevant discounted securities—that is, securities held by persons not within the charge to corporation tax and issued at a discount compared with the eventual amount payable on redemption.
The first change relates to an earn-out right in the form of a qualifying corporate bond when a double charge to both income tax and capital gains tax could arise. Modifications in the Bill, which is deemed always
to have had effect, includes the value of the earn-out right in the issue price of the security, which should eliminate the risk of double charge.
The second change is a restriction on any loss on the transfer to a commercial person of a relevant discounted security by a person who acquired it on its issue, paid more than its market value at the time of issue and is connected with the issuer. There is a similar effect when the issuer is a closed company and, although the person in question may not be connected with the closed company, he and any other persons who issue securities of the same sort taken together control the company. The new rule applies from 26 March 2002 when the change was announced and restricts the loss in such cases. There is no motive test.
The Law Society is the main professional body to comment on the clause and is essentially the author of the amendment. Its purpose is to ensure that the clause applies when business assets as well as shares or debentures are exchanged for earn-out rights.
I endorse the point made by the hon. Member for Arundel and South Downs. It is important, especially for small businesses, which often sell assets rather than the shares of the company for tax as well as other reasons. It is also important to retain a flexible economy and to allow people to organise their own affairs satisfactorily. These assets probably provide their only pension, and when selling a business or smoothly passing over a business, often assets rather than shares are sold. I hope that the Government will help the small business sector by accepting the amendment.
The circumstance of double taxation raised by the hon. Members for Torridge and West Devon (Mr. Burnett) and for Arundel and South Downs is not a problem that the Revenue has seen, and as far as we know it has not arisen. However, the amendment seeks to prevent a double charge to income tax and capital gains tax and, although we do not believe that that would arise, the amendment would make the matter clear. I am therefore persuaded by the hon. Gentlemen that it would be wise to accept it, and I recommend it to my colleagues accordingly.
On a point of order, Mr. Gale. May I record my gratitude? Double taxation is indeed unfair, and we are very grateful to the Paymaster General, especially at such an early hour.
The Chairman: That is not strictly a point of order for the Chair, but it is now on the record.
Amendment agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Clause 102, as amended, ordered to stand part of the Bill.
Clauses 103, 105 and 83 ordered to stand part of the Bill.