I am not sure that I shall get the same reaction from the Paymaster General as the previous amendment got. I and many in the business world welcome the Government's initiative in bringing forward the treasury regime. It will make the manipulation of share capital much easier and it will become more compatible with American procedures. However, various questions arise.
Stamp duty on a company's acquisition of its own shares is dealt with in paragraph 5. When a company purchases its own shares it is exempt from stamp duty, which is fine. Something that comes up in that paragraph is the £5 fixed stamp duty. We discussed that under the previous clause, so I shall not go over it again, except to say the provisions look like tax and stamp duty on the issue of shares via the back door.
Stamp duty of 1.5 per cent. will now be chargeable if the treasury shares held by the company are transferred to a person whose business is using depository receipts or providing a clearance service. I am not entirely sure why stamp duty in that case is
more than 0.5 per cent. There may be a good reason for that, and I would appreciate it if the Minister explained. Perhaps I am missing something, but if not, could a company not issue more shares than the institution concerned and pay zero stamp duty instead of selling that same institution its treasury shares, which would therefore result in stamp duty of 1.5 per cent.? The provisions seem to be inconsistent in that respect. If there is a point to be made in connection with that, I am concerned, because it looks as though the provisions will act as an obstacle to the whole concept of treasury shares before they even exist. I should therefore be grateful for the Minister's comments.
The schedule and the associated clause provide for the tax consequences following changes made in company law by regulations. Those changes will allow listed companies to purchase their own shares, hold them, and subsequently sell them back into the market or cancel them. Shares held in that way are often referred to as treasury shares. The tax measures are necessary to ensure that own shares purchased by a company will be treated in the same way for tax purposes, irrespective of whether they are purchased and immediately cancelled. When the company sells the shares or transfers them to an employee share scheme, they are treated for tax purposes as if they were a new issue of shares. The new rules make no changes to the tax treatment of own shares purchased and immediately cancelled. The measures are part of a package to give listed companies additional flexibility to manage their capital efficiently, so of course I commend the schedule to the Committee.
The hon. Gentleman asked about the stamp duty charge in relation to a company purchasing its own shares. No stamp duty is payable when shares are issued by a company, so if there were no charge when a company purchased its shares, individuals could avoid stamp duty by the company purchasing the shares from the seller, then issuing new shares to the purchaser. The stamp duty charge removes the scope for avoidance and the provisions ensure that the stamp duty treatment for shares purchased and held in treasury is the same as currently applies to shares purchased and cancelled.
The hon. Gentleman also asked about the 1.5 per cent. duty. That is the normal entry charge for shares that are issued on or transferred to a depository bank. From that the shares are then transferred tax free, which is the interaction of the two relevant measures.
Question put and agreed to.
Schedule 40 agreed to.
Clause 193 ordered to stand part of the Bill.