Clause 114 - Abolition of duty on instruments relating to goodwill

Finance Bill – in a Public Bill Committee at 5:30 pm on 18th June 2002.

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Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 5:30 pm, 18th June 2002

I beg to move amendment No. 173, in page 91, line 33, at end insert—

''or ordinary trade debts as defined in paragraph 35(5) of Schedule 16''.

What we have learnt is that goodwill is good and property is bad, but we welcome the abolition of duty on goodwill and the announcement that property other than securities and land will be exempt from stamp duty towards the end of 2003. That policy decision having been taken, we ask why the assets that can now easily be taken out of the net of stamp duty should not be taken out now, instead of after a delay of over a year. In particular, the clause effectively recommends that the transfer of book debts should be immediately exempt from duty. A suitable definition of ''book debts'' can be found in paragraph 35(5) of schedule 16. The essence of the point is, why not introduce that measure now?

Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury

Under clause 114, stamp duty charges on transfers of goodwill are abolished with effect from 23 April 2002. That puts goodwill into the system used with intellectual property, which we exempted from stamp duty in the Finance Act 2000. The goodwill exemption benefits businesses by removing the stamp duty charge when they are bought and sold. I am glad that the hon. Gentleman recognises the strength of the case that we are making for that exemption. The measure is a response to representations, both concerning stamp duty and following a wider consultation on corporation tax on intellectual property, goodwill and other intangibles.

As we announced when consulting on stamp duty modernisation, we intend to revise the scope of stamp duty in future so that it focuses on interests in land and excludes not only intellectual property and goodwill but receivables. We therefore understand the case for the exclusion of debt, partially covered by the amendment, but we intend to do that in a proper and coherent fashion in the context of a full examination of the scope of stamp duty under modernisation.

The amendment is incomplete in what it would achieve, seeking as it does to exempt ordinary trade debt but not receivables in a wider sense; for instance, packages of debt used to underpin an issue of bonds. The definition of ''ordinary trade debt'' in schedule 16 is not suitable for our purposes, as we intend to deal with debt more broadly. The wider exemption of receivables will be achieved most appropriately by giving all types of debt our full consideration, with reference to the revised scope of stamp duty under modernisation. Therefore, I urge the hon. Gentleman to consider withdrawing his amendment.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 5:45 pm, 18th June 2002

I would have liked the Financial Secretary to address the debt issue a little more than she did. We are pleased by the general thrust of clause 114. There is a technical matter that might better be pursued later, and perhaps the Law Society's concerns are not correct; therefore, I do not want to put the amendment to a vote. I am not entirely happy that my point has been fully resolved but, in the light of what the Financial Secretary has said and further discussion, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 114 ordered to stand part of the Bill.

Schedule 36 agreed to.