I beg to move amendment No. 325, in
clause 192, page 124, leave out lines 27 to 38 and insert—
'(6) Where any shares of a company are subject to a transaction which falls, or would fall, within the scope of sections 126 to 131 of the Taxation of Chargeable Gains Act 1992 (company reorganisations etc) or any enactment applying the said section 126 in a modified form (together ''the relevant enactments''), and that company holds any of its own shares (''the treasury shares''), then the relevant enactments shall apply to those shares which are not treasury shares ignoring the effect of the transaction (if any) upon the treasury shares.'.
The stated intention of the clause is to put companies that purchase their own shares to be held in treasury in the same position as companies that purchase their own shares and immediately cancel them. First, we would like to know why there is an additional £5 fixed stamp duty cost on the subsequent cancellation or transfer of shares held in treasury in addition to the 0.5 per cent. charge on the repurchase itself.
Broadly, it seems that the Government have made a meal of the introduction of treasury share legislation. Amendment No. 325 is designed to simplify the approach and to reflect that the Bill ought to say that treasury shares are invisible for tax purposes and not treated as an issue, hence the capital gains tax tests for reorganisation relief. They should be ignored.
After hearing my hon. Friend talk about the £5 fixed stamp duty, I thought that I would voice my own concerns about it. It might seem an acceptable or de minimis amount, but why is there any stamp duty at all when for other tax reasons—outlined in other parts of the Bill—a buy-back of shares into the treasury is to be treated as an issue of shares? Normally, there is no stamp duty on an issue. There used to be, some 10 or 15 years ago. One is left to wonder whether this measure is a way that the Government has found to bring back stamp duty on an issue of shares via the back door.
Perhaps I should concentrate on the £5 fixed duty charge. That charge is consistent with circumstances in which a transfer is treated as otherwise than on sale. For example, it also applies to an instrument transferring shares to a nominee. Stamping a document with a fixed duty enables the Stamp Office to confirm that the sale of the share is not subject to ad valorum duty, which helps to provide certainty.
The hon. Gentleman will find my next sentence very helpful. Perhaps he will remain in his seat for just one moment.
If there are concerns that the measure will cause difficulty in particular circumstances—although we are aware of no such difficulty—I suggest that the bodies concerned enter discussions with Revenue officials so that the issues can be aired and a way forward found. There is a perfectly rational reason for the stamp duty, which I have explained. It is difficult to deal with concerns that are raised in a Committee before representations and discussions with officials. I am not complaining, but I suggest that those who can demonstrate those difficulties should bring them forward now to the Revenue officials so that they can be discussed.
Are we not talking about a matter of principle? Stamp duty should not be paid on the issue of shares. If the Paymaster General is saying that she is going to change that principle, she should be up front about it. If something is not subject to stamp duty, one could still have a stamp that says, ''Not subject to stamp duty''.
I do not think that the hon. Gentleman was listening to what I just said. I do not agree with him on his point about a principle. He has raised something that he says is a problem and a matter of principle. I have said that I do not agree. Then, the argument is advanced that there will be difficulties. Quite reasonably, I have extended the suggestion that those who have difficulties must make representations to the officials concerned, so that we will be able to go forward in a rational and sensible way. I have no intention of accepting amendments on the basis of no information and no discussion with officials. I ask the hon. Member for Arundel and South Downs to withdraw the amendment, so that discussions can take place. If he does not, I will ask my hon. Friends to oppose it.
I beg to move amendment No. 326, in
clause 192, page 125, line 10, after 'treated', insert
'for the purposes of Part 6 of the Taxes Act 1988'.
This is a Law Society amendment to clarify the application of the clause and schedule. The Law Society and others raise the question of whether the clause is necessary. They feel that the interpretation of section 126(7) of the Taxation of Chargeable Gains Act 1992 may be incorrect. They point out that bonus shares do not have to be issued on a pro rata basis, and that if clause 192(6) is required, it needs to provide that it does not prevent the issue of new shares from being ''an issue''.
In particular, the Law Society does not understand the purpose of clause 192(7). It is unclear about the intended position of a scheme of reconstruction that is intended to fall within section 136 of the 1992 Act that involved a target company that held some of its shares in treasury. The society feels that it would be helpful if clause 192(8) were to provide for what purposes the
share capital of the treasury shares had been disposed of and that it should be treated as if it were an amount equal to the value of that consideration. They take the view that the purposes for which the share capital is to be so treated are probably the purposes of Part VI of the Taxes Act 1988, but they do not believe that clause 192(8) is intended to apply to the purposes of determining the percentage of ordinary share capital that one company owns in another company for the purposes of the various grouping tests.
In short, treasury shares should be a relatively straightforward issue. However, although they are well intended provisions, the professional reaction to them has been to question their clarity and whether some of the measures are necessary.
I am grateful to the hon. Gentleman for seeking to clarify the application of that aspect of the clause. Clause 192(8) has no relevance to the determining the amount of ordinary share capital. Share capital is something quite different. However, we have identified that the amount of share capital is relevant to one of the tests for the company control. We did not intend that the sale of shares out of treasury at below nominal value should change the amount of share capital for the control test. I therefore agree, but for slightly different reasons to those put forward by the hon. Gentleman, that that aspect of the clause is relevant only to Part VI of the Taxes Act 1988.
I am grateful to the hon. Gentleman for drawing a minor technical inconsistency to my attention. I am therefore pleased to recommend to the Committee that the amendment be accepted.
Amendment agreed to.
Clause 192, as amended, ordered to stand part of the Bill.