The clause deals with the incorporation of limited liability partnerships. Many Committee members will know that that equivalent of a corporate structure has been increasingly popular for many of the leading professions—in law, accountancy, surveying and so on. Therefore, the clause will be of particular concern and interest to those limited liability partnerships.
I have one specific question. The explanatory notes assure us that the clause merely re-enacts the existing relief under the Limited Liability Partnerships Act 2000, although ''with minor amendments''. Will the Chief Secretary advise us as to what those amendments are and how they may affect a
partnership? Clearly, that is relevant. A number of professionals have asked me whether this provision is what they describe as a belt-and-braces approach, particularly clause 65(4)(b). Will the Chief Secretary touch on why he believes that that subsection is essential to the clause?
Clause 65 provides an exemption from SDLT if a partnership incorporates a former limited liability partnership. It mirrors an existing stamp duty relief, subject to certain conditions. When land is transferred to an LLP in connection with its incorporation, the land transaction will be exempt from duty. The clause ensures that the stamp duty relief for the incorporation of LLPs continues in SDLT.
There is a technical defect in the current legislation if the partnership is incorporated into an LLP. The transfer is exempt if the partners in the LLP are the same as they were when the LLP was incorporated and when the transfer takes place. Often, the LLP is incorporated with two nominees, so the exemption never applies. If the nominees are merely acting as nominees or bare trustees for the partners, the exemption will still apply.
I am asked why the amendments are minor. They merely bring what we are discussing into line with the SDLT, rather than stamp duty. They do not change in any way the provision's effect. On the question whether the anti-avoidance provision in clause 65(4)(b) is necessary, it carries forward the anti-avoidance rule in the current stamp duty legislation. It is a standard provision that prevents the relief from being granted if there is a change in the proportionate holding in the partnership as a result of a scheme or arrangement of which the main purpose, or one of the main purposes, is tax avoidance. Removing that provision would encourage SDLT avoidance, which would not be consistent with the Government's commitment to fairness.
With that clarification of the minor amendments and the technical defect in current legislation and the explanation of why the anti-avoidance provision in clause 65(4)(b) is necessary, I hope that the Committee will accept clause 65.
I took the Limited Liability Partnerships Bill through Parliament for my party. With regard to flexibility, it would help if the Chief Secretary would confirm, as I hope he can, that if there is disincorporation, if I may use that expression, of a limited liability partnership, or distribution of LLP property in specie back to a partnership—in other words, the limited liability partners want to cease to be limited liability partners and become ordinary partners—or if an LLP wants to incorporate and become a limited company, similar stamp duty reliefs will apply.
I want to reflect on that point. Having taken that Bill through the House for his party, the hon. Gentleman will recall that there was some discussion at the time. The position is that there is no relief at present for disincorporation. Stamp duty follows the rest of the tax system in that regard, and I
am not aware of any intention to depart from existing practice.
No, no—structure. I want the business structure to be changed if it is in the interests of the shareholders. People should be able to move quickly, tax-efficiently and without punitive tax treatment from limited companies, limited liability partnerships or partnerships or to becoming sole traders again.
The hon. Gentleman makes an interesting point, and I shall reflect on it.
Question put and agreed to.
Clause 65 ordered to stand part of the Bill.