Finance Bill (except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 3, 11, 12, 21 and 37 to 39) – in a Public Bill Committee at 2:30 pm on 13th May 2004.
At the risk of testing your patience, Mr. McWilliam, may I just double back and say to the hon. Member for Grantham and Stamford (Mr. Davies) that I tried to explain this morning that clause 51(4), which he was querying, contains standard wording in respect of transfer pricing? Transfer pricing was dealt with in a previous part of the Bill. As he said, the detail did not come up because the wording is an established standard. However, if it will help him, I will write with the detailed explanation that he seeks of that standard provision and formula.
I am grateful to the Economic Secretary for that assurance and for his acknowledgment that I was right in saying that the matter had not been raised on Tuesday. We have set the record straight.
However, as a matter of principle, the fact that wording is standard should not mean that it is not open to challenge during annual passage of the Finance Bill. The whole purpose of this exercise, which you, Mr. McWilliam, and many colleagues who are more distinguished than I spend many hours on every summer, is to expose to public scrutiny and debate the Taxes Acts. As it is the only opportunity that we have to do so, it would be contrary to the role of Parliament if the notion that is implicit in what the Economic Secretary just said were to become accepted in this Committee— that, because a piece of wording is standard, it is no longer open to challenge or even subject to explanation by the Government.
Order. That intervention was a bit long. The hon. Gentleman knows well that we are not on clause 51, because we have dealt with it. It is a matter for the members of this Committee, or at later stages, the Members of either House, to seek to amend any legislation in any way they like, provided that it is in order in the context of the legislation.
If I may, I will address schedule 10, which accompanies clause 52. The schedule makes a number of detailed technical changes to the legislation about the tax treatment of debt and securities—the loan relationships legislation—and about derivative contracts, intangible fixed assets and currency accounting. The hon. Member for Arundel and South Downs (Mr. Flight) raised a number of points on the clause and, as he said, they probably need to be the subject of detailed discussion with the Revenue.
Indeed, the points that he raised are already the subject of discussion with the Revenue under the consultation arrangements that I explained earlier.
I beg to move amendment No. 90, in
schedule 10, page 317, line 1, leave out '93A(3)' and insert '93(3)'.
The amendment corrects a typographical error. I trust that the Committee will accept it.
Amendment agreed to.
Question proposed, That this schedule, as amended, be the Tenth schedule to the Bill.
The points that the hon. Member for Arundel and South Downs raised are already being discussed with the Revenue, but I suspect that he would appreciate a general indication of their merit. He asked whether credits and debits were the wrong way round in the relevant area of the schedule. He and his advisers may well have a point. We will consider the matter more closely and see whether it can be dealt with in guidance, or whether an amendment will be necessary.
The hon. Gentleman asked what would happen if a company with a dollar functional currency incurred a trading loss. The short answer is that the loss would be carried forward in dollars. That point has already been explained to the Law Society. I reassure the hon. Gentleman that the points that he raised will be covered in discussions with the Revenue.
The schedule is a long one and is being discussed in detail with the industry and the professional bodies. In summary, it modernises the interaction of tax and accounting. It allows the concepts and methods of accounting used in the international accounting standards to be followed for tax. It retains existing rules where they perform a useful function, and where IAS may give inappropriate results compared with current tax treatments.
This is just a small cosmetic point. If debits and credits are wrongly referred to in the draft, we should make sure that we get the primary legislation right, rather than dealing with that superficially in the guidance. We should be taxed not by Revenue fiat but in accordance with the law.
I was going to make the same point in a different way. To the extent that there are places where the drafting needs changing, I hope that the Economic Secretary will confirm that the Government will
propose amendments and not simply rely on guidance notes for the interpretation of basic law that may be wrong.
The hon. Gentleman may not have heard me correctly. I explained that we will consider whether the matter can be dealt with in guidance or whether an amendment is necessary. If it is necessary, we will certainly introduce an amendment. I place just as high a premium on getting the primary legislation right as he does.
Finally, the schedule smoothes the transition from existing UK generally accepted accounting practice to IAS, and the revision of UK GAAP based on IAS. The schedule is welcomed by business. It reduces compliance costs by allowing accounting practices to be followed more closely for tax. I commend it to the Committee.
Order. I will just let hon. Members know my intentions. If there is a vote, I will suspend the Committee for 15 minutes. In any event, I intend to suspend the Committee at or about 5 o'clock, because although members of the Committee may drift in and out, we must have consideration for members of staff—[Interruption.] Good Lord, I could have got burnt at the stake for that in the middle ages.
Sitting suspended for a Division in the House.
I suppose I should say, belatedly, that gentlemen may remove their jackets. As I was saying, before I was rudely interrupted, it is my intention to suspend the Committee for half an hour at 5 o'clock or thereabouts, because the staff will need a break, and then resume again.
Question put and agreed to.
Schedule 10, as amended, agreed to.