I beg to move amendment No. 400, in
clause 196, page 165, line 4, at end insert
(c) in prescribed circumstances.'.
This is again a fairly technical amendment. It applies to the limited exceptions granted to companies from the 35 per cent. charge—what would have been a 32 per cent. charge if the Government had accepted my previous amendment. We would argue that the provision may be too restrictive. Incidentally, before the Financial Secretary says anything about my ''prescribed circumstances'', I must make it clear that the Inland Revenue would prescribe the circumstances. The reason for giving this flexibility is that, as drafted, the exclusions from the tax charge may be too restrictive. For example, it could catch
refunds of contributions paid in error if the employer had not yet sought to use the payment to reduce profits chargeable to corporation tax. The amendment would give a little more flexibility and avoid such an unintended consequence.
As the hon. Gentleman outlined, the clause allows registered occupational pension schemes to pay surplus funds back to employers, subject to a tax charge of 35 per cent. payable by the scheme administrator. Subsection (6) provides that the charge will not apply if the sponsoring employer is a charity or is otherwise exempt from tax. That replicates the current legislation, which provides a similar exemption from taxing amounts of surplus returned to employers. The reason for the exemption is that such employers would not have received any tax relief on the amounts contributed to the scheme, and so in turn are not taxed on amounts of surplus funds returned to them.
Amendment No. 400 would provide a power to extend the exemption to cover other circumstances. The clause as drafted already provides for exemptions for all sponsoring employers who would not have obtained tax relief on contributions. I do not agree that we should provide for other circumstances to be covered, as in every other case the employer will have received relief on contributions. The clause provides an appropriate exemption for all sponsoring employers who have not obtained relief on contributions. I see no reason to extend the provision. I therefore urge the hon. Gentleman to withdraw the amendment.
We were attempting to give the Inland Revenue a little more flexibility to cover circumstances that we thought might arise but that it had not considered, such as refunds of contributions paid in error, when the employer has not yet sought to use the payments to reduce profits chargeable to corporation tax. One of the consequences of the codification of much of what used to be done through tax approval and negotiation with the Inland Revenue is that the Revenue is closing down some of its options for flexibility. The amendment was an attempt to give the Revenue a little more flexibility, but it does not want it, so I shall remove the option, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 196 ordered to stand part of the Bill.